Corporate Governance in Family-Owned Businesses in Saudi Arabia:

Shari’ah Challenges and Legal Policy Recommendations

Hajed A. Alotaibi

Abdullah Ali Alasmari

 

Abstract: Family-owned businesses constitute a dominant segment of Saudi Arabia’s private sector, contributing approximately 60–70% to GDP and employment. Despite their economic significance, these enterprises face persistent corporate governance challenges rooted in informal structures, intra-family conflicts, and the complex integration of Shari’ah principles. This article critically examines the intersection of Islamic law and corporate governance in Saudi family firms, particularly in light of the New Companies Law (2022) and Vision 2030 reforms. It identifies key legal gaps in succession planning, fiduciary duties (wilayah), inheritance (mirath), and the enforceability of family charters. Drawing on doctrinal, comparative, and empirical methods, the article analyses landmark family business disputes, such as Al-Gosaibi and Abdul Latif Jameel, and evaluates the Saudi family business governance model in comparison with models from the UAE and Malaysia. The article proposes a harmonised governance framework for Saudi Arabia incorporating enforceable family constitutions, Shari’ah-compliant holding structures, and specialised arbitration mechanisms. These recommendations align legal reform with cultural and religious norms, promoting intergenerational continuity, investment confidence, and regulatory efficiency. The findings contribute to ongoing policy debates on embedding Islamic ethics within modern corporate governance in multigenerational enterprises.