A Report Overview of Family Business in Venezuela: Politics, Governance and Internationalization

Exaudi Family Business Consulting (www.exaudi.org), in conjunction with the University of Zulia (Maracaibo), the Metropolitan University (Caracas) and the University of Carabobo (Valencia), conducted the study "Characteristics and Trends of the Venezuelan Family Business (period 2010-2012)”, taking a sample of 106 companies from a universe of 600 and applying an online questionnaire methodology.

A major finding is the strong roots of family businesses in the country. While acknowledging the difficulties to continue operating, most of these companies do not intend to leave the country. They also show a desire to open a branch or additional production facility abroad, which would be in charge of generational change, for example, a son or nephew. The intention, in many cases, is to set its sights abroad as a protection of capital is presented as a strong trend that could deepen.

Venezuelan family businesses are highly concerned about the current government policy, legal and personal insecurity and the issue of eminent domain, in that order. Unlike this, in Costa Rica or other more stable countries in the region, the primary concerns relate to succession issues, family conflict and level of sales.

Nearly 70% of respondents believed that the political and legal reforms the Government does not guarantee the continuity of generations of the family business in Venezuela, but many express the effort to invest to stay in business. Most do not plan to sell or close the company or move their families to another country by choice, which conveys the intention of defending their space.

The lack of professionalism of the managers, the difficulties in managing corporate governance and succession issues are hot spots that appear in the study. Half of the board of directors is composed mostly only by members of the family-owned and 31% say that this does not work properly due to conflicts between members.

According to the survey, 73% of the Venezuelan family businesses do not have a Family Council and 30% do not even know what it is. Another 37% want to create it, which would have a greater chance of professionalism in the organizational structure. Something similar happens with the succession plan. The majority of respondents without this plan, but half say they would have it, as this clarifies basic questions as who will inherit the company, will split the shares and profits, who will lead, what how will the transition, or how it will affect employees.

As for Family Constitution, 78% of respondents do not count on it, but half say appreciate it. Family firms with members of the second generation in a managerial position are more aware of the importance of professionalism and the need to seek opportunities in nontraditional markets. In fact, they are willing (at least half of them), to the creation or strengthening of specific tools to avoid common problems in the family business (i.e., confuse business with personal wealth of its members, and succession management structures with fuzzy boundaries, family issues integrated into the business, problems of internal audits, concentrations of power, emotional reactions that impair decision-making, failure of internal conflict management, and others).