Ahmad Aljumah, Partner and COO at BDO Saudi Arabia, examines five decisions that can help family businesses reduce founder dependency, strengthen governance and prepare the next generation for ownership and leadership.
Succession risk begins before succession
Succession rarely becomes a risk only when a founder decides to step away. The risk develops much earlier — when authority, relationships, institutional knowledge and critical decisions remain concentrated in one individual.
For Saudi family businesses that are growing, diversifying or professionalising, succession planning is therefore not simply about identifying the next leader. It is about building an organisation that can continue to make sound decisions, retain stakeholder confidence and pursue growth through leadership transitions.
Three questions should be answered long before succession becomes a pressing issue:
- If the founder stepped away tomorrow, who would have the authority and credibility to lead?
- Will the next generation inherit ownership, management responsibility or both?
- What happens when the interests of the family and the needs of the business no longer point in the same direction?
For most family businesses, five decisions deserve particular attention.
1. Who can run the business without the founder?
A credible continuity arrangement should establish who has authority over employees, banking and treasury matters, major customers, contracts, investments, regulatory issues and significant expenditure. This becomes increasingly important as Saudi family businesses grow, diversify and professionalise.
A successor may have the title without yet having the confidence of senior management, lenders, major customers or other family shareholders. Equally, a long-serving executive may command considerable trust across the organisation but lack sufficient formal authority to make important decisions.
Boards should therefore consider succession on two tracks. The first is emergency succession: who assumes authority immediately if a key leader becomes unavailable? The second is planned succession: who has the capability and credibility to lead the business through its next stage of development?
There is another dimension that is harder to document: relationships. If every major customer still expects to speak to the founder, every significant investment ultimately requires the founder's approval and senior executives continue to seek informal endorsement after authority has supposedly been delegated, the organisation remains founder-dependent regardless of what the organisation chart says.
One question provides a useful test of founder dependency:
“Could the business continue making high-quality decisions for six months without the founder's daily involvement?”
If the answer is no, the first priority is not choosing an heir. It is reducing key-person dependency.
2. Whether the next generation will be owners, executives or both
Set family employment criteria before naming candidates
A family member may be a committed and responsible shareholder without being the right person to run the company. Another may have strong executive capability but little interest in serving on the board. Some may contribute through a family council or investment committee. Others may choose to remain passive owners.
The family should therefore agree, before discussing individual candidates, what qualifies a family member to enter the business, what qualifies someone to progress within it and what qualifies someone eventually to lead it.
The criteria will differ between businesses but may include education, relevant external experience, sector knowledge, leadership capability, performance history and readiness for the complexity of the role.
Ownership and executive authority are different responsibilities
The same principle should apply to remuneration, promotion and performance assessment. A family member joining the company should understand that executive responsibility carries the same accountability expected of any other senior employee.
The governing principle is straightforward:
“Ownership can pass from one generation to another. Executive authority should be earned through capability and appointment.”
Ahmad Aljumah, Partner and COO, BDO Saudi Arabia
Placing a family member in a senior role primarily because of surname or expectation can damage that individual's credibility as much as it can damage the business. It can also make it more difficult for talented non-family executives to see a long-term future in the organisation.
For family businesses operating in the context of Vision 2030, attracting and retaining strong talent is becoming increasingly important. Boards should therefore define the requirements of the future CEO before deciding who the candidate should be — and assess family and non-family candidates against the same business requirements.
What IFC governance guidance recommends
This is consistent with established international family-business governance practice. The IFC Family Business Governance Handbook emphasises formal family employment policies, professional management practices and structured CEO succession planning as family businesses grow in size and complexity.
For the next generation, it changes the conversation from “What position will I inherit?” to “Where can I make the strongest contribution?”
3. What happens when the family's interests and the company's interests diverge?
One shareholder may prefer higher dividends while management needs to retain capital for expansion. One branch of the family may seek liquidity while another wants to preserve ownership indefinitely. A family member may expect employment that the company cannot commercially justify. The business may need an external CEO when some shareholders believe leadership should remain within the family.
Saudi Arabia provides a particularly relevant framework for addressing these issues. Article 11 of the Saudi Companies Law allows incorporators, partners or shareholders to enter into agreements governing their relationship and to establish a family charter covering matters including family ownership, governance and management, employment of family members, dividend distribution, disposal of shares and mechanisms for resolving disputes.
The charter is binding and may form part of the company's constitutional documents, provided it complies with the requirements of the Law and those documents.
The practical value of such arrangements is straightforward: they allow families to agree the rules while relationships are constructive, rather than renegotiate them when interests diverge or succession becomes urgent.
One principle is particularly important:
“The family can determine what it expects from ownership. The board must still govern in the interests of the company and exercise the responsibilities entrusted to it.”
As ownership moves from founder to siblings, cousins and subsequent generations, maintaining that distinction becomes increasingly important.
4. What kind of board will the next generation inherit?
Family directors can provide continuity, institutional memory and a strong connection to the owners' long-term ambitions. But as the business grows, the board should also include people who bring experience and perspectives that the family itself may not possess.
Independent directors can be particularly valuable because they can challenge assumptions, bring specialist expertise and help maintain objectivity when business decisions become entangled with family interests.
Saudi Arabia's listed-company governance framework also provides a useful reference point for private family businesses, even where its provisions are not directly applicable. The CMA Corporate Governance Regulations require the majority of the board of a listed company to be non-executive directors and require at least two independent directors, or one-third of the board, whichever is greater.
For a private family business, the objective is not to replicate listed-company governance mechanically. It is to determine what degree of independent challenge, specialist expertise and board discipline the business now requires for its size, complexity and ambitions.
5. What does the family ultimately want from its ownership?
Succession planning ultimately depends on what the family wants the business to become.
Is the objective to preserve ownership across generations, create liquidity for some shareholders, bring in external capital, pursue acquisitions, introduce a strategic investor or potentially access public markets? Different ownership ambitions require different governance, capital and leadership choices.
Recent BDO Saudi Arabia research provides a useful perspective on why these decisions should be considered early. In our 2026 IPO Experience Survey of 24 senior executives and board members from Saudi companies that had completed IPOs on the Main Market or Nomu, 50% identified establishing governance and an independent board among their most challenging readiness workstreams. With hindsight, 54% said they would have upgraded governance and the board earlier.
The benefits extended beyond regulatory compliance. 88% identified strengthened governance and transparency as a positive post-listing impact, while the same proportion reported improved brand visibility and market credibility.
The research also highlights the importance of preserving strategic options. 58% said the alternative they had most seriously considered instead of an IPO was a strategic investor, M&A transaction or joint venture.
Ahmad Aljumah encourages family business leaders to view governance as a source of flexibility and long-term resilience:
“The broader point is that good governance preserves strategic choice.”
Ahmad Aljumah, Partner and COO, BDO Saudi Arabia
A business with credible management, reliable financial information, clear ownership rights and a functioning board can decide from a position of strength whether to remain private, introduce a strategic investor, undertake an acquisition, enter a partnership or eventually access public markets.
Succession is a system, not a name
Family businesses possess advantages that many companies would value enormously: patient capital, deep relationships, institutional memory and the ability to think across generations.
Saudi Arabia's Companies Law has given family businesses a useful mechanism to formalise arrangements that may previously have depended largely on custom, personal relationships or verbal understanding. The opportunity is to use those mechanisms before succession becomes unavoidable, rather than after differences have already emerged.
The best time to address succession is therefore not when a transition becomes unavoidable, but while the founder can still help shape the governance, leadership and institutional capability that will carry the business into its next generation.
A practical board test
Before a board concludes that succession planning is genuinely in place, it should be able to demonstrate five things:
- A documented emergency and planned succession arrangement, with delegated authorities and material key-person dependencies identified.
- Clear criteria for family employment and leadership appointments, together with an approach to developing the next generation and separating shareholder rights from executive roles.
- A family governance framework or charter addressing the issues most likely to create future tension, including dividends, employment, ownership transfers, exits and dispute resolution.
- A board with the capability and decision rights to govern without depending on the founder's informal authority, including sufficient objectivity and independent challenge.
- An agreed view of long-term ownership and liquidity, including how the family would approach shareholder exits, external capital, strategic investors or a possible future listing.
If several of those answers still depend on “the founder will decide when the time comes”, the succession risk is already present.
How BDO Saudi Arabia can support family businesses
Succession often sits at the intersection of governance, ownership, leadership, tax, financial readiness and long-term strategy. Addressing one dimension in isolation may therefore leave important dependencies unresolved.
BDO Saudi Arabia works with family businesses, shareholders and boards to assess succession readiness and strengthen the structures needed for long-term continuity.
Depending on the family's priorities, this may include governance and decision-rights frameworks, family charters, succession and leadership arrangements, board effectiveness, ownership and liquidity considerations, financial and tax implications and readiness for external investment, transactions or future capital-market options.
The objective is not to impose a standard governance model, but to help each family build arrangements appropriate to its ownership ambitions, business complexity and next stage of growth.
If your family business is beginning to consider generational transition, governance professionalisation or future ownership options, an early readiness discussion can help identify the decisions that should be addressed before they become urgent.