family owned business research paper

Corporate Governance in Family Businesses

It’s all in the Family

• First Online: 21 July 2023

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• Shital Jhunjhunwala 2  

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The Governance intricacies in family-run business firms :

About 80% of companies worldwide and 40% of Fortune 500 companies are family businesses. Studies have shown that when compared with other firms, family firms perform better in tough periods in contrast to periods of economic boom. This is because family firms are not looking at making a quick buck while the sun shines. They are creating wealth for the family and building a legacy for future generations. Hence governance approach is to take a long-term view, save for a rainy day and focus on meeting family aspirations.

The intersection between family, ownership, board and management and the overlapping interest groups, creates a unique governance cost of balancing family expectations with interest of company’s other stakeholders particularly outside shareholders. Family Dynamics, conflict between family aspirations and company requirements, unwillingness of promoters to relinquish control, non-acceptance of outside managers, inadequate succession planning and limited role of independent directors are additional governance issues faced in family-owned businesses.

Only a small percentage of family businesses survive and grow beyond second and third generations. Successful families define their family enterprise and nourish it by creating strong bond among members, nurturing family values and building sound networks based on mutual trust. With appropriate governance mechanisms and timely actions, both families and their businesses can not only preserve but prosper. Formal structures-family council, family assembly and the family charters bolster the family governance system. In a world full of uncertainties, only business houses that have mastered the art of family enterprise have survived many years.

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About this chapter

Jhunjhunwala, S. (2023). Corporate Governance in Family Businesses. In: Corporate Governance. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-99-2707-4_11

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DOI : https://doi.org/10.1007/978-981-99-2707-4_11

Published : 21 July 2023

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Leadership: Research Findings, Practice, and Skills 2nd Edition

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• ISBN-10 0395856647
• ISBN-13 978-0395856642
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• Publisher Houghton Mifflin
• Publication date January 1, 1998
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• Publisher ‏ : ‎ Houghton Mifflin; 2nd Edition (January 1, 1998)
• Language ‏ : ‎ English
• ISBN-10 ‏ : ‎ 0395856647
• ISBN-13 ‏ : ‎ 978-0395856642
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About the author

Andrew j. dubrin.

Andrew J. DuBrin is a Professor Management emeritus at the Saunders College of Business at the Rochester Institute of Technology, where he has taught courses in organizational behavior, leadership, and career management. He received his PhD in industrial/organizational psychology at Michigan State University.

DuBrin has business experience in human resource management, and consults with organizational and individuals. His specialties include leadership, organizational politics including influence tactics and impression management, and career development. He is an established author of professional books, text books, and trade books, and also contributes to professional journals.

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