Fouad Makhzoumi. Special Edition of the Socrates Almanac

 

Embed or link this publication

Description

Fouad Makhzoumi. Special Edition of the Socrates Almanac

Popular Pages


p. 1



[close]

p. 2

EUROPE BUSINESS ASSEMBLY INTERNATIONAL PRIZE Best Enterprises for professional achievements in commercial activities from the Editorial board of Socrates Almanac This publication of the Socrates Almanac dedicated to the story of the life and achievements of Mr Fouad Makhzoumi, a prominent Lebanese businessman, the founder and president of Future Pipe Industries one of the world’s leading manufacturers of fiberglass pipes. This edition is a digest containing the best articles and interviews with Mr Makhzoumi from leading international and national publications. The collected materials gives the reader an insight into the man who created one of the largest industrial empires in the Middle East. Find out about his success, sources of inspiration and professional victories in this edition. Mr Fouad Makhzoumi is a real leader, who bravely overcame difficult life circumstances. Having gone through trials and losses, he regained his passion for the world, people and the desire to do good things. He is a patron and philanthropist, founder and co-founder of a number of charities and the initiator of many social programs. By the nature of his activities, Mr Makhzoumi regularly takes part in international conferences, symposia, business meetings, global business projects and partnership initiatives. He remains an open and simple man always ready to help those who are struggling. He is an active sponsor of social programs in his homeland and always happy to help young businessmen and support the Arab culture. Nowadays, the Future Management Holdings Group has many offices worldwide. In particular, the UAE, Egypt, Oman, Qatar, Saudi Arabia, Italy, France, Netherlands, Germany, England, Spain, Morocco, USA, Thailand, India, Indonesia and Singapore. Through the nature of his activities, Mr. Makhzoumi combines two business traditions - Arab and European: he is not only successfully using them in creating his own business strategy, but also promotes Western economic ideas in the Arab countries. With his efforts creating a bridge between the West and the Arab world, including an increase in the mutual understanding between cultures, Mr Makhzoumi is the image of business success in a global world. Europe Business Assembly Empress Court, 2 Woodins Way, Paradise Street, Oxford, Ox11HF, UK E-mail: assembly1@leaders-21.com Web-site: www.ebaoxford.co.uk

[close]

p. 3

Dear Mr Makhzoumi, On behalf of the Europe Business Assembly I would like to congratulate you on receiving the awards “Top Manager of the Year” and “Best Enterprise” for “Future Management Holdings Group”, the highest award of the Europe Business Assembly for effective management and successful production activities. Among the main priorities of our organization is to identify the leaders of industry, science and business internationally, your achievements in your profession were of a particularly high standard. Remarkable production rates combined with a humanitarian mission, active charity and philanthropy also support your reception of these awards. The European awards will not only show evidence of your high standard of management and the work of your team, but also present the opportunity for new business relationships, and assist in implementing the most ambitious business projects. We wish you good health, strength and success for the future. May you have the best of luck with your worthy endeavors. Yours sincerely, President of the Europe Business Assembly - Professor John W. A. Netting

[close]

p. 4

S ocrates Alma na c Let us introduce Mr. Fouad Makhzoumi In 1984, a company controlled by Mr. Fouad Makhzoumi, acquired a substantial interest in a UAE based pipe manufacturing and trading business. Under Mr. Makhzoumi’s leadership and industrial expertise what became the Future Pipe Industries Group, which is now wholly owned by Future Group Holdings, has grown into one of the world’s largest producers of composite pipe systems and is now a global player in its scope of activities with specialized subsidiaries in four continents. As well as Future Pipe Industries Group, Mr. Makhzoumi controls a diverse portfolio of investments including: engineering; industrial; commercial; research; real estate; security; information; multimedia and publishing businesses. Together, these companies employ more than 3,500 people across the world, in the following countries: Lebanon, United Arab Emirates, Egypt, Oman, Qatar, Saudi Arabia, Italy, France, The Netherlands, Germany, UK, Spain, Morocco, U.S.A., Thailand, India, Indonesia and Singapore. Mr. Makhzoumi has been the Executive Chairman of Future Pipe Industries Group since 2003 and is currently its Chief Executive Officer. He has also been the Executive Chairman of Future Group Holdings since 1982. Public Activities In addition to his achievements in the world of commerce, Mr. Makhzoumi has, throughout his career, participated in a wide range of public and political activities. He believes his economic and business experience gives him particular insight to political and social situations, not only in Lebanon, but also in the Arab World in general; and, he has long been viewed as a prominent figure in international, political and diplomatic circles. His involvement in public affairs intensified after the Lebanese civil war ended and in 2004 he founded the National Dialogue Party of Lebanon, which he has acted as its Secretary General since its foundation. Other key public activities include: • A member of the Board of the US Middle East Project (USMEP) (1994-) • President of the International Desalination Association (19951997) • Vice Chairman of the Institute for Social and Economic Policy in the Middle East at the John F. KennedySchool of Government at HarvardUniversity (1995-1998) • Member of the International Board of the Council on Foreign Relations: US/Middle East Project (1996-) • Member of the Board of the Arab Reform Initiative (ARI) (2006-) • Member of the Center for Strategic and International Studies (CSIS) (2008-2010) M r Fouad Makhzoumi was born in Beirut, Lebanon, in 1952. He received his preliminary and secondary education at the International College in Beirut and then he obtained his undergraduate (1974) and Master of Science degrees (1975) in Chemical Engineering from Michigan Technological University United States of America. Mr. Makhzoumi was appointed a Commander of the Order of Merit of the Republic of Italy in 2013, and received the Socrates Oxford Annual Award in 2014 by the European Business Assembly (EBA) in Vienna. MrMakhzoumi has received many other awards and trophies, including: • International Desalination Association (1997) • National Press Club of Canada Foundation Ottawa – Ontario,(2009) • Canadian Lebanese Community – Edmonton, Canada (2009) • Islamic Lebanese Canadian Association – Montreal, Canada (2009) • The Arab Organization for Administrative Development – Arab League and Tatweej Academy (2011) • The Lions Club – Beirut (2012) • Press Club - Beirut(2012) • Office of the Mayor – President City of Baton Rouge-Parish East Baton Rouge – Louisiana - USA (2013) In 1975, Mr. Fouad Makhzoumi, as a new graduate sough to realize his ambition in the Kingdom of Saudi Arabia. In the world of business, he has shown vision, initiative and, a readiness to take bold steps and to undertake adventurous projects. In Saudi Arabia, Mr. Makhzoumi played a strategic role in developing one of largest private industrial group of companies. 4

[close]

p. 5

S o c rates Almanac • Member of the Board of the International Council for Middle East Studies (ICMES) (2009-) • Member of the International Institute for Strategic Studies (IISS) (2009-) • Member of the De Gasperi Foundation (2012-) • Member of the Board of Trustees of the Buck Institute (2013-) • International Ambassador of the Regional CSR Network (Bahrain) (2014-) Mr. Makhzoumi has made many contributions and appearances in the print and broadcast media, including the “Alhiwar” newspaper which he founded in 1999 the first newspaper to issue a daily electronic newspaper, in English and Arabic, which is the “Mirror of the Arab Press”. He sponsored a study on “Harnessing Trade for Development and Growth in the Middle East”, prepared by a group of experts selected by the US Council on Foreign Relations. H u ma n i t a r i a n and Philanthropic Activities Mr. Makhzoumi devotes much of his time and resources to charitable deeds.In 1997, he founded the Makhzoumi Foundation, a private Lebanese non-profit organization that contributes to vocational training, health care and micro-credit programs to Lebanese civil society development. In 1998, a sister Foundation, “Makhzoumi Foundation (USA) Inc.”, was set up to give a wider support to the Lebanese Foundation. The Micro Credit Loan program provides small loans to individuals in order to help them finance their own sustainability in life. This program has already provided over 6,500 loans to underprivileged Lebanese families to start or expand small businesses through capital loans made on the basis of their sound planning rather than the financial collateral normally required from borrowers. The micro credit loan program is carried-out with, primarily, the financial support of the Founder, Mr. Makhzoumi, and of international organizations, such as USAID and LIM. In addition to this loan program, the Makhzoumi Foundation operates vocational centers in which thousands of Lebanese citizens are provided with training in languages, computer skills, as well as internet skills, hardware repairs, hairdressing, barbering, beauty, photo and video shooting, plus other vocational skills. It also provides health care through its clinics across the country. Moreover, the Foundation implements different projects related to environment and sustainable development. Any Lebanese citizen is eligible for these programs and acceptance criteria are based on the basis of ”need, not creed”. So far, over 250,000 people have benefited from the Foundation’s Programs. Mr. Makhzoumi has forged strong relationships with a number of leading educational institutions and has established a number of endowments, including: at the University of Alberta, Canada, the “Makhzoumi Lebanese Studies Endowment” (2009); at the American University of Beirut, the “Rami Makhzoumi Chair in Corporate Governance” (2011) and at the International College in Beirut yearly awards for Leadership and Excellence (2012). He is a supporter of the Lebanese American University (LAU); and the American University of Sharjah, UAE, where “The Makhzoumi Foundation Scholarship for Entrepreneurship in Industry” was set up in 2014. 5

[close]

p. 6

In Oriole of glories articles, meetings, interviews Fouad Makhzoumi :

[close]

p. 7

S o c rates Almanac THE OIL & GAS YEAR | ABU DHABI 2013 Life as we know it interview with fouad makhzoumi Future Pipe Industries is a Dubai-based pipe manufacturer, with plants in the GCC, the greater Middle East, Europe, Asia-Pacific and the US.The company is also a systems designer of anti-corrosion fibreglass piping – a material quickly becoming the first choice for pipelines in the oil and gas industry. The GCC has the largest penetration rates of fibreglass - 22 percent from an overall pipe market perspective, and of 5 percent within the oil and gas industry itself. However, we estimate this rate to grow to as much as 20 percent. What are some of the regional expectations associated with the pipeline industry? Today, some 60 percent of our business comes from the GCC region, but we expect to see that number at 50 percent by 2015. Abu Dhabi in particular aims to further expand its production capacity from 2.7 million to 3.5 million barrels of oil per day by 2017. We will therefore see an increase in pipeline construction projects and greater demand for expertise and capacity.Asa result,there is going to be an increased emphasis placed on delivering more efficient products. What is the role of pipelines in the UAE’s infrastructure and hydrocarbons industries? The expansion and development of oil and gas operations, infrastructure projects, urban areas and populations would be impossible without pipeline systems. They are the arteries of our societies, transporting our water, sewage, gas and crude oil, without which life as we know it would be unsustainable. The UAE is witnessing a rapid population growth and urbanisation along with the expansion of energy-intensive industries, which are key to fulfilling the UAE Economic Vision 2030. Based on the estimate that for every newborn baby there is a need for two metres of new pipeline,there is currentlya never-ending supply of work to be done. Most recently, the prime minister of the UAE and ruler of Dubai, Sheikh Mohammed Bin Rashid Al Maktoum, laid out plans for the Dubai Vision 2020, an ambitious infrastructure development project that will require the construction of more roads and power plants and the delivery of more fuel and water. Pipelines are expected to play an important part in this plan. What are the relative advantages of using fibreglass as a pipeline material? As operating environments in the oil and gas industry become increasingly demanding as a result of higher pressures, higher levels of corrosion and higher general wear, materials that can better withstand these environments are becoming sought-after more and more. Fibreglass offers corrosion-resistant properties and is by far the most efficient pipe system. When you take pipelines made from steel, ductile iron or concrete and install them in a tough terrain, there will be corrosion.The only protection possible is to compensate with an electric current. If metallic piping is used in oil wells, it normally takes a few years before it must be replaced due to corrosion. Fibreglass, on the other hand, is essentially there to stay, operating for up to 50 years under normal working conditions. It has a high strength-to-weight ratio, which translates into lower transportation and installation costs compared with traditional materials such as concrete or steel. It can also withstand high loads, pressures and temperature, and is resistant to hydrogen sulphide and other chemical applications. This is especially important in the UAE, where reserves are producing increasingly sour oil and gas. Are there any drawbacks to constructing pipelines out of fibreglass? There are some technical limitations to the material, one of which is temperatures of more than 150 degrees Celsius. However, for normal applications, fibreglass is an efficient alternative. Given that corrosion poses major problems for conventional pipe material in high-pressure upstream applications, the non-corrosive characteristic of fibreglass has made it the material of choice. It offers significant savings because fibreglass requires little to no maintenance. A recent report by independent business information provider Visiongain stipulated that $ 18.72 billion was spent on the prevention of oil and gas pipeline corrosion in 2012. Are fibreglass pipes being received positively by the global marketplace? The market size of the pipe business stands at approximately $150 billion worldwide, with an estimated growth of 5 percent each year. This figure includes everything from fibreglass, polyethylene and metal pipes to concrete. Worldwide, fibreglass pipes account for $5.3 billion, growing at an above-market average rate of 6.8 percent, which is a testament to its accelerated adoption by the end users over other material. IN F I G URES Total length of pipeline installed globally 160,000 kilometres Percentage of large diameter 26 percent Founded 1984 Number of staff worldwide 3,000 fibreglass market in GCC region f o u a d ma k h z o u m i . I n O riole of glories 7

[close]

p. 8

S ocrates Alma na c May 2013 Oil&Gas Midle East Piping hot THE REGION’S MAJOR OIL & GAS PRODUCERS ARE IN THE MIDST OF A MAJOR SHIFT IN PIPELINE MATERIALS. CORROSION RESISTANT FIBREGLASS AND SPECIALITY PLASTICS HAVE BECOME THE NEW MATERIALS OF CHOICE FOR UPSTREAM OPS. ith access to the approximately 50% of the world’s oil and gas reserves, the Middle East region finds itself under increasing pressure to deliver to a resourcehungry market. However, as time passes access to such reserves is becoming more difficult, and hence more costly, prompting an analysis of every aspect of the industry in a bid to improve efficiency and cut unwanted outlay. The pipeline sector – an unheralded but integral aspect of the industry is one such tranche of business which continues to push ahead with improvements. In the upstream oil and gas sector, any concerns over a lack of investment appear unfounded, as projects continue to be rolled out. Just last week, an $18bn pipeline project was announced between Iraq and Jordan. The 1,043 mile-long dual pipelines would be capable of transporting 1 million barrels of oil and 258 million cubit feet of gas per day from Iraq to Jordan’s port city of Aqaba. Officials claim the line, which includes a sub-line to Jordan’s refinery at Zarqa, will be operational by 2017. W January saw the start of the $518 million Iraq Crude Oil Export Facility Reconstruction project, for the South Oil Company of Iraq. This was completed by Leighton Offhsore and is designed to stabilise and expand Iraq’s crude oil export facility, by constructing a pipeline that connects crude oil storage facilities to the offshore crude oil export terminal in Fao, Basrah in southern Iraq. The project involved the development of two offshore valve station platforms, a 75 kilometre 48” oil pipeline and a Single Point Mooring system. Closer to home, in June 2012, Saudi Arabia and the UAE opened new pipelines bypassing the Strait of Hormuz in order to secure exports following Iran’s renewed threats to close the shipping lanes. The UAE’s pipelines runs from oilfields near Abu Dhabi to the port of Fujairah. The 370-kilometre pipelines has a capacity of 1.5 million barrels/day, equivalent to 65% of the country’s exports. Once again, as with many elements of the oil and gas industry, there is an every-present demand in terms of development of new technologies. One such tranche is the use of composite fibreglass materials, which, as Fouad Makhzoumi, chairman of Future Pipe Industries explains, has become increasingly prominent, given its technical and economic advantages. 8 f o u a d ma k h z o u m i . I n O riole of glories

[close]

p. 9

S o c rates Almanac FPI, which has worked in a number of oil and gas upstream and downstream sectors, including the Sayyala pipeline for Petroleum Development Oman (PDO), the Jubail refinery and Assab and Sahil fields for ADCO in Abu Dhabi. “FPI is a leading producer of fibreglass pipes and one of the fastest growing companies in the fibreglass sector with a wide range of products covering many oil and gas applications across the Middle East. Our composite corrosion free fibreglass cover applications in the exploration, production and transmission. Our high pressure fibreglass pipes are used on offshore platforms and rigs and floating production and storage of oil (FPSO), oil fields, flow lines, injection lines and disposal lines,” says Makhzoumi. As with other sectors of the oil and gas industry, the twin pressures – time and money dominate thoughts. FPI utilise an integrated engineering approach and bespoke products, providing manufacturing, supply, engineering, site installation, field support and fabrication support. The strains of operating at high-pressure and temperature mean that technologically, the materials used must be of high quality. Composite fibreglass has the added advantage of being not just able to withstand these factors, but to withstand H2 S to a certain level of concentration. “As the current conditions for oil and gas production get more challenging, the key to our success has been in understanding the challenges, predicting the market changes and investing in technologies to provide reliable solutions to our customers”, said Makhzouni. The growth in fibreglass pipes has been increasing over the last 10 years. Primarily this is because of its physical properties of superior anti-corrosion, safety, and longer life cycle cost-effectiveness, gives it an innate advantage over traditional materials used in the oil and gas sector in the 1960’s, 70’s and 80’s. Fibreglass pipes can also compete effectively in the large diameter pipe market, in high-pressure areas and in elaborate pipe networks extending over several thousand of kilometres. According to the World Corrosion Organisation, corrosion costs $2.2 tn to the global economy, and almost 45% of the cost Approximately 45% of the annual $2.2 trillion cost attributed to corrosion each year is from O&G infrastructure. “As the current conditions for oil and gas production get more challenging, the key to our success has been in understanding the challenges our customers are facing” Fouad Makhzoumi, chairman of Future Pipe Industries is attributable to the oil, gas and petrochemical industries. Whilst there is no doubting its competitive advantages, Makhzoumi believes a disadvantage currently with fibreglass, is that it isn’t reaching its full potential, with the industry yet to take full advantage. “What we could say is that the fibreglass industry in general, is that the product is in its early stages of lifecycle and users haven’t captured its full value. “The fibreglass pipe market size within the oil and gas sector is estimated to be $1bn, with the majority in the US. And with the positive results coming out of the country, we have been witnessing lately a positive adoption shift to fibreglass products in the Middle East as well and we expect these adoption rates to improve as we move forward,’ he said. The growth in fibreglass technology was illustrated recently when FPIG recently acquired 100% of Specialty Plastics, Inc from ITT Exelia. SPI, based in Louisiana, US, is a leading supplier of fibreglass pipes and systems for offshore platforms and marine vessels. The takeover is a strategic addition to FPIG’s composite pipe business and adds significant new offering to its already extensive product range extending FPIG’s global capabilities in the offshore rig and floatation production and storage of oil (FPSO) market. “We are excited about this new opportunity,” said Makhzoumi. “The acquisition of Specialty Plastics is a strategic fit to FPIG that will complement its product offerings, geoGetty Images www. arabianoilandgas.com May 2013 Oil&Gas Middle East 81 TECHNICAL FOCUS Traditional high-grade steel is being replaced by fibreglass piping. Major pipeline projects are underway throughout the MIddle East. graphical reach and customer sectors.” Makhzoumi adds the utilising SPI’s solutions, people and expertise will extend FPIG’s ability to deliver competitive services. “The acquisition of SPI will further enhance our existing manufacturing and sales operations in the US and expand our reach within the oil and gas sector,” he said. f o u a d ma k h z o u m i . I n O riole of glories 9

[close]

p. 10

S ocrates Alma na c The GCC has the largest penetration rates of fibreglass from an overall pipe market perspective, and 5% within the oil and gas industry. FPI claims this number could rise to 20% in the coming years, driven primarily by the vast increase in exploration and production, both onshore and offshore, which ensures a substantial need for pipe systems, which can efficiently transport resources directly to consumers. Away from the UAE, there are big projects underway Saudi Arabia, which will require extensive input from pipeline companies. Larsen & Toubro learned this week it was the lowest bidder for the $800 million Saudi Aramco Midyan Gas field (EPC) project in Saudi Arabia, according to reports. The contract is to build it’s the plant’s upstream processing facilities including a 135 km pipeline to transport to the power plant in Saudi Arabia. The Midyan gas field, located in Tabuk province will produce 75 million ft3 /day gas concentrate over a 20-year period. The output will be transported to the coastal city of Duba, 135 km away. Meanwhile, the Abu Dhabi Maritime Operating Company (Adma-Opco) is currently 20% New Materials cost of corrosion attributable to the oil, gas and petrochemical industries. preparing the evalutation of technical bids to be submitted in Q2 2013, on the EPC packages of the Al-Nasr Full Field Development project offshore Abu Dhabi. Technologically, firms continue to drive for better materials. In March, Sabic began manufacturing thermoplastic grades at its affiliates in Jubail and Yanbu in Saudi Arabia, which could revolutionise the domestic pipelines sector. Named Bimodal High Denisty Polyethylene (HDPE), the qualities include safety, costeffectiveness and earthquakeresistant with a good tensile strength. Being lightweight means it is also requires much less energy to produce and transport. Sami Al-Osaimi, General Manager, Global HDPE Business Unit, SABIC Polymers Strategic Business Unit, said, “SABIC’s HDPE range offers exceptional value and is superior in many ways to similar imported products. They deliver exceptional low sag performance for large-diameter pipes and pressure pipes with a low standard dimension ratio.’ With the demand for oil and gas set to increase ever more, NOC’s and other players will need to adopt new methods to access resources from nonconventional deposits. This means higher temperatures, pressure, increased presence of H2S and ultimately more costly. Any advance which meets these challenges will be welcomed by the industry, as there is no doubt the pipeline market will not be standing still. As Makhzoumi concludes, “As operating environments in these industries become increasingly challenging as a result of higher temperatures, higher pressures, higher corrosion and higher wear, the demand is increasing for materials that can better withstand these environments.” 10 f o u a d ma k h z o u m i . I n O riole of glories

[close]

p. 11

S o c rates Almanac The Hawkamah Journal Issue 01 2014 THE GOVERNANCE JOURNEY OF A FAMILY BUSINESS interview with fouad makhzoumi e would like to explore the corporate governance journey of the Future Pipe Industries. And we would like to start from the very beginning, and we would like you to take us through the early days of the business. What is now Future Pipe Industries was founded in 1984 in Dubai, after I recognised the immense opportunity in the pipe business, especially in the desert where there was a need for water distribution and also petrochemical production. We acquired the Eternit business in Dubai, which had been incorporated back in 1971 with the support and blessing of his Highness Sheikh Rashid bin Saeed Al Maktoum and which commenced production in 1973. Since then the business has concentrated on meeting the needs of the region during its phenomenal growth over the past thirty years. We have grown alongside it and Future Pipe Industries’ operations now span over twenty three countries, with over 20 sales offices and 13 pipe manufacturing factories, as well as offering services varied from design to engineering, to after sales support. The group has its own sales and marketing, internal audit, finance, legal communication & IT departments. Business grew and expanded with over three thousand employees and hundreds of customers, government bodies and private large companies. Corporate governance in the Gulf has come a long way since the late nineties, driven by increased public governance and greater awareness of higher standards. Our responsibility within FPI has always been to develop effective corporate practices which will also facilitate innovation and support business operations. Let us turn to family involvement. It is often considered that family businesses do not start out as family businesses, but become so over time. When did you start viewing your business as a family business? A number of family members became involved in the business over the years, starting from 1980s. Did you encourage or discourage family involvement in the business? And how did FPI manage the process of hiring family members? W Over time and after several restructurings, and given the growth in the pipe industry and the opportunities it offered, I managed to bring in many of my university friends and my colleagues from Saudi Arabia to work with me. At a later stage I recruited brothers, in laws and cousins, with relevant experience of course. I didn’t bring in the fresh graduates. I wanted them to work in other companies first, to gain experience before joining FPI. To an extent we have therefore always been a family business. Progression into positions was according to merit and experience, not because of being a relative, as this was no privilege. The same goes for my son Rami. Rami was introduced to the factories from a young age and saw the business grow, even when he was still at college studying Business, I used to take him to attend negotiations for joint ventures and company acquisitions, to see things on the ground and not only through books. f o u a d ma k h z o u m i . I n O riole of glories 11

[close]

p. 12

S ocrates Alma na c When Rami joined the company he had to go through all the departments from procurement to manufacturing, to sales, to engineering, and so on. It was only after all training was done and he had attended the office and progressed in his skills that he earned his position as CEO, and in due time. When Rami took the lead he brought in a young team consisting partly of some of his childhood friends. You always have confidence in family and friends to be by your side as they have your interests in mind, thus the interests of the business. Also they would always want to prove they are in such positions because they earned it and not because of their relation to the boss. By the 1990s you had three young children, one of whom would later become the CEO of the company - when did you start thinking that you would like to pass the business on to the future generations? There was no plan in my mind to compel any of my kids to follow suit. When Rami wanted to choose his major at university I took him around to visit many universities in the US other than the universities in London to see what was on offer and decide. It was actually Rami who decided to join the family business after a lengthy consideration. In 2003 my decision to appoint him as my successor was taken after a lot of thought and after watching him grow and perform in an increasingly mature and assured manner. Rami flourished with the responsibility, bringing passion, vision, ambition and great humanity to his administration of business, and it is under his leadership that FPI became as successful as it is today. Let us turn to the grooming process – in the book “The CEO’s journey” – it is mentioned that you gently started grooming Rami without being explicit about it, taking him to meetings with people such as Pope John Paul II and Sir John Major. To what extent was this grooming as a father as opposed to grooming as a business man? What advice would you give to other business owners on how they should start grooming the second generations? I believe that it’s our responsibility to teach our children about life, the good and the bad, you guide them through and advise them. I believe if you succeed in having your children not making 50% of the mistakes that could have been done, then it is a job well done. Grooming kids for life is grooming them to face it all in day-to-day life and in business. I am a great believer of preparing the young generation from early age. To get them involved in the history of the business and the achievements, as even if they decide not to work in the business, yet one day they will be sitting on the board as shareholders. So yes I am a believer in involving the second generation at early stages. I even believe in passing on the helm when the older generation is still able and capable to guide the younger generation through their first few years, so by the time they want to retire or leave this world, they know that the business is in good hands. I am a believer that the second generation will bring new original ways and up-to-date methods to move the company forward. 12 f o u a d ma k h z o u m i . I n O riole of glories

[close]

p. 13

S o c rates Almanac And once Rami joined the business, what role did the nonfamily employees play in the grooming process? From the factory floor, to the executives reporting to him, to the board members, Rami was just a unique guy that earned great respect and a leadership role at such a young age. In each department he was advised, but he conducted his own research too. Of course feedback was given by the heads of departments to the CEO, who at the time was me. We also had many regular discussions to make sure that all questions Rami had in mind were answered. Rami was an observer and a good listener and that helped him progress through all areas. And I did not offer Rami to take full office until I was fully satisfied that all was in order. Businesses truly become family businesses when passed on to the 2nd generation, but many CEOs of family businesses find it extremely difficult to let go. However, you suggested to Rami in 2003, when he was 25 years old, that he should consider becoming the CEO of the company. Why do you think you were able to make this decision to pass on the business when many others cannot? Passing the business on to your family is as much a matter of personal preference as a commercial decision, and one has to think that there is time when you let go, and better let go when you are still alive, still around and can still play a role even from the back seat. Thus ensuring that the business will succeed after you leave. The overriding concern is whether any family member is both interested and has the right skills and experience, however, Rami understood the culture of the company, and he was very good at taking a long-term view of what is best for the business. Rami was even the one who suggested diversifying the family’s personal investments independently of the business. He brought consultants to start a family office; to put everything in proper working order so as to manage the family business and assets and ensure everything falls in place for direct family, and other family members who work in the group and those who don’t. He was the one who was behind introducing the disciplines to treat the company as a public one; the introduction of advisory board, stricter rules and transparency was one of the major fundamentals initiated by Rami. Rami had a lot of ideas that he brought to the business such as Corporate Social Responsibility and he tackled it from all aspects, responsibility towards employees (vigorous training and workshops for advancement), towards customers (better communication), towards upper and lower management to improve company performance as one team, towards the communities of the countries they are in and towards the environment, making FPI a leader in that field. In the book “The CEO’s Journey”, there is a dialogue between you and Rami at the time when he was taking over as CEO: f o u a d ma k h z o u m i . I n O riole of glories 13

[close]

p. 14

S ocrates Alma na c Fouad: “Rami, you are coming from a different generation. So the management is going to reject you. The only thing is to prove to all of them that you deserve the post, not because your name is Rami Makhzoumi. You have to engage all these people, you have to give them credit where it’s due, and you have to be very firm where it’s needed.” Rami: “Give me time… And don’t get involved.” A transition process such as this obviously requires that the new CEO performs, which he did, but what did this require from you as the current Chairman and former CEO? How did you manage not to get involved? Did clients, suppliers, staff and other stakeholders initially come to you? At the beginning they did, but I directed them to Rami emphasizing that it’s Rami who was leading FPI now. It did not take long before all realized that there was a new skilled CEO, and very rarely was I bothered after that. As for customers and suppliers they knew Rami, he was not a new comer, he had good relations with them, as I had done the introductions years back and slowly shifted the relation to Rami, so it was an easy transition. As Rami said, to be able to prove himself, he had to be left alone, and not to be seen as my son. To help him do that, I took a step back and watched. Of course I was always there to give advice if needed, but it was discretely and never obliging Rami to abide, but left the decision to him. Rami became well-known within the business community as a visionary leader and as the driving force behind corporate governance reform in FPI, but he was also instilling governance on the family side – he instigated the Family Office as well as the Makhzoumi Family Constitution. He also started preparing the business to go through an IPO and consequently a Board was set up. What was your view on these developments? What were the costs vs benefits? As with every new thing, the old generation has its own views of how things should proceed. But Rami had been to London Business School for his Masters, he was involved in the Young Arab Leaders (YAL), and the Young Arab Presidents (YAP) associations, he was a speaker and a panelist in family business conferences, he was exposed to all the new challenges facing the modern world and he had a better vision of what should be done. At the end everything made sense. In regards to the family constitution it proved to be the best thing that Rami did for the family, as it put us on the right track to move forward. As for the changes in the company, putting things in place; whether in HR, Communication, or IT, it was all a step forward towards his 2020 Vision which we are still working towards to this day. As for the Advisory Board, it has benefitted us tremendously as we have members from the Middle East, Europe and US, who bring a vast knowledge and expertise to the table with a profound advice. Seeing things from outside the box is an asset. Any cost here is justified. 14 f o u a d ma k h z o u m i . I n O riole of glories

[close]

p. 15

S o c rates Almanac Additionally, there were several enhancements that happened on the management and on the board level. In particular, we have enhanced the risk framework and the risk management. Going through the IPO process, of course it was a costly exercise, and even with the IPO not coming through, the procedure itself helped us develop many of our current processes and practices to improve the efficiency, the transparency and the disclosure and enabled us to truly behaving like a public company. At the end the IPO did not go through as the decision was to withdraw at the beginning of the Financial Crisis; this proved to be the right decision during those challenging times. In particular, the policies and procedures that were scattered all over the company were governed in one framework in a way that adds value to the overall structure. We have clearly defined the roles and responsibilities between the board and the management, in particular to have a greater, enhanced sense of accountability and responsibility between the two levels. How has the board added value to your business? The board of directors in a family business is a structure that can help steer a business and provide direction for the organization. The board has a strategic function in providing the vision, mission and goals of FPI. Each of our board members has been appointed for their substantial experience and deep expertise, including backgrounds in governance and engineering, as well as energy and water resource management. With the board in place the risk and remuneration governance continued to be very important aspects. What are the characteristics you most value in an independent non-executive director? Being independent! That is the most important value. They must remain highly independent and ask challenging, often difficult questions. Being away from the day to day issues, help them see the bigger picture. It is like having a Bird’s eye view, you can analyze better and point out things that people from the inside cannot. Independent non -executive directors need to bring a truly independent perspective, champion their area of expertise but not hide behind it. You are the Chairman, you are the founder, largest shareholders – how do you conduct board meetings to ensure that the board does not become a group of yes men? Well, when you are used to the old way of doing things it will be very difficult to change from that habit. But when you have an independent board that is appointed because of their expertise and experience you cannot ignore their recommendations, and you have to listen to their views. Mostly board level decisions are collective decisions, even if some decisions are not to the liking of some, the majority rules. Looking at FPI’s history, what do you think are the key takeaways for other business owners? For a business to succeed you have to believe in it. To make it grow you have to grasp every opportunity. To become a market leader you have to be innovative, to do so you need to keep on reinvesting your profit into the business, into new products, new machines, R&D and of course the most important asset, your employees. f o u a d ma k h z o u m i . I n O riole of glories 15

[close]

Comments

no comments yet