StatCo is in its 3rd generation of ownership that is specialized in constructing private hospitals. The company founder, Mr. Robert Jaber, retired twenty years ago and left the company to his son, Mr. Sam Jaber, and daughter, Ms. Amira Logan. Combined the two families own 80% of StatCo, the remaining 20% is owned by private investors (nonfamily). There are five children between the two families. The complete family profile and ownership structure is as follows:

Family Description – Jaber and Logan Families

FAMILY BUSINESS GOVERNANCE

Name/Age

Share % Married/ Children Company Involvement

Jaber Family

40%

SamJaber (68)

30%

Married; Two Children

Chairman/CEO

Sam Jaber Jr. (35)

5%

Married; Two Children (12, 10)

General Manager; Consulting his Wife in every detail

Marwa Jaber (31)

5%

Single; No Children

Non-Executive; Runs her own graphic design business

Logan Family

40%

Amira Logan (65)

30%

Married; Three Children

Board Member; Retired Former Executive

Max Logan (39)

4%

Married; Two Children (17, 15)

Former Executive; Now has own construction business; Wife is Executive in HR

Jehad Logan (35)

4%

Married; One Child (10)

PR manager, he was unemployed for a long time because of his poor qualifications and lack of interest. His child expenses obliged him to follow his family business

Tina Logan-Williams (34)

2%

Married; Two Children (12,8)

Runs her own fashion firm. She is a problem maker, she is never satisfied by the dividends

Among the cousins, Sam Jaber Jr. has progressed the highest in the executive ranks; he is the General Manager of StatCo. Despite that, many co-workers respect his abilities, but also acknowledge that he lacks industry depth in either construction or healthcare. Some feel that he was been promoted to GM a bit soon, but also understand his father’s determination to groom his son quickly before retirement.

None of the Logan Family children is currently involved in the company. Max Logan used to be a senior executive in the Construction Unit, but then quit last year to start his own construction company. He had a reputation of making bold (brave) moves (though some very successful) without the approval of his uncle, or the CEO, or other executives. Max wife is currently a senior executive in the Human Resources department of StatCo; a well-paying job that Max helped her obtain. She is still trying to finish her college degree. Max also recently obtained an internship in StatCo for his oldest son (17). Whereas Tina Logan who was abundant from her family because she married against her father well, she managed to hire her best friend (has an Art diploma) as a designer at the company.

Board of Directors

Mr. Jaber described the board of directors for StatCo. The current board consists of the following members:

FAMILY BUSINESS GOVERNANCE

Director

Age Background

Mr. Sam Jaber

68

40% owner, Chairman/CEO of StatCo., UAE

Ms. Amira Logan

65

40% owner, retired former executive, UAE

Mr. Ochoa

72

1% owner, retired, former banker, family friend, UAE

Mr. Mansour

68

5% owner, retired, owns a construction co., family friend, UAE

Mr. Martin

63

Non-owner, CFO of StatCo, UAE

Mr. Jaber proudly noted that most of the members have been on the board for the past decade and therefore know the company inside and out. He described the group as essentially being “extended family” with a very positive working relationship and rare disagreements.

Mr. Jaber indicated that his board meets twice per year and they have a weekend retreat after the year-end where he briefly describes the strategy for the coming year to the other members. The meetings are being kept short and to the point because most of the strategy and the major decisions have been made in advance by Mr. Jaber, noting that when an issue comes up, he deals with it immediately. Beyond that, he is the only one who determines the managers' compensation, the BOD members' rewards, and the dividends based on the business performance and loyalty.

Control environment

Mr. Martin, the CFO and a board member too was very proud of his strong internal controls especially that the internal auditor (besides auditing the company files he also does the payroll system) directly reports to him.

As for the External auditor, S&W (a mid-size, local UAE firm), has been auditing StatCo for more than 15 years, and as such, “knows the company better than the company knows itself". S&W proudly noted that they are very interested to keep StatCo happy since it represents nearly one-third of their revenues, and that they strive to be a “complete business partner”.

Mr. Sam Jaber Jr. is aiming to expand the work beyond UAE and therefore he is seeking additional capital (10% to 15% equity) to support his planned expansion, but he was facing vital obstacles; that is why he decided to consult the IFC.

Suppose you are a family business specialist working with IFC who will handle StatCo case, your mission is to prepare a report within two months and handed to it the Mr. Sam Jaber Jr. and to the BOD as well, covering the following areas: (30 points)

1- Identify three problems at the family structure and suggestions with applicable solutions.

2- Identify three problems at the BOD and suggestion with applicable solutions.

3- Can you show a rule thumb followed when compensating the BOD members?

4- Identify two problems at the control environment and suggestion with applicable solutions.

5- Suggest a way of increasing the capital (15% to 20% equity) by the end of 2023.

6- In case, Mr. Sam Jaber (the father) disagreed with the suggested changes of his son Sam Jaber Joiner (Jr.). Can you suggest on Mr. Sam Jaber Jr. ways to overcome such potential conflicts?

Answer rating: 100% (QA)

1 Identify three problems at the family structure and suggestions with applicable solutions Problem 1 Lack of Professional Qualifications within the Logan Family Jehad Logan has poor qualifications an... View the full answer