Better To Recruit An Outsider If No Natural Leader In Sight – Joe Zammit Tabona

Marie-Claire Grima - 1st October 2018

When it comes to succession within a family business, it’s better to recruit an outsider if there is no natural leader within the family that’s approved by all the successors, said Joe Zammit Tabona, Director of the Xara Palace Hotel Co and Infinitely Xara.

Speaking at the Malta Chamber’s A Family Affair conference, Mr Zammit Tabona said that the further down the generations a family business went, the more likely it would be that allegiances would shift, potentially leading to disagreements when it came to who would head the companies. “Cousins do not have the same allegiances as siblings,” he said.

He said that negotiation and compromises were the very essence of a family business, and discussed a case he himself had assisted with, where three siblings, who ran a successful group of companies, wanted to split the company up. He said this would have been a ‘big mistake’ so he mediated amongst those involved, and divided the company in three sectors, rather than splitting it into separate companies, whilst reaching an agreement to appoint a non-executive chairman. “20 years on, they’re still benefitting from being united, and are receiving much healthier dividends than if they had gone their separate ways.”

Mr Zammit Tabona said that proper succession planning ensured continuity that would give confidence to clients, employees and stakeholders. He warned that at the moment, fewer than 10 per cent of all family businesses made it to the third generation, but added that it was encouraging to see more companies preparing for succession early on, aided by accountants and law firms. “More families are understanding their place, and this means that more non-family members being appointed chief executive officers.”

He stressed the importance of keeping family members in the loop, and ensuring that there was a dividend policy in place to the benefit of all shareholders. He also pointed out that legislation of family business should include family offices, which looked after the needs as well as the assets of the shareholders in a more constructive manner. “That would ensure that the family business is moving forward.”

Marie-Claire Grima

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Marie-Claire Grima

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