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Corporate Governance pp 399–414Cite as

Effective Governance in the Family Owned Business

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Abstract

Family business is the most prevalent form of organization in the world. It has been estimated that as many as 90 % of businesses are either family owned or family controlled. A third of the firms listed on the S&P 500 and those of the Fortune 500 are family owned or controlled by families. Much of the governance literature focuses on the larger publicly owned non-family corporations rather than on the unique issues of the more prevalent family businesses. This chapter presents information to give the reader an understanding of the unique and complex nature of family owned businesses, their problems and challenges, and the unique governance structures and practices used to effectively manage a family business to greater performance. Due to the predominance of family members in upper management roles, which leads to a reduction of agency costs, family firms have less bureaucracy, allowing for fast decision-making and the creation of competitive advantages. Depending on the organizational structure, family firms have shown superior financial performance compared to their non-family counterparts. Goal congruency among the top management team and a long-term outlook are differentiating factors that lead to improved performance. Family firms, however, can also benefit from an increase in more formal governance mechanisms.

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Author information

Authors and Affiliations

  1. California Baptist University, Riverside, CA, USA

    Keanon J. Alderson

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  1. Keanon J. Alderson
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Correspondence to Keanon J. Alderson .

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Editors and Affiliations

  1. , Dept. of Accounting Finance and Law, Champagne School of Management, Avenue Pierre Brossolette 217, Troyes Cedex, 10002, France

    Sabri Boubaker

  2. , Cambridge Judge Business School, University of Cambridge, Trumpington Street, Cambridge, CB2 1AG, United Kingdom

    Bang Dang Nguyen

  3. , Dept. of Finance & Information Systems, ISC Paris School of Management, Boulevard du Fort de Vaux 22, Paris, 75017, France

    Duc Khuong Nguyen

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© 2012 Springer-Verlag Berlin Heidelberg

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Alderson, K.J. (2012). Effective Governance in the Family Owned Business. In: Boubaker, S., Nguyen, B., Nguyen, D. (eds) Corporate Governance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-31579-4_17

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