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5. Governance in the Family Business

5. Governance in the Family Business. What are the four typical agency problems in family firms? What are the central domains of family, ownership, corporate and wealth governance?

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5. Governance in the Family Business

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  1. 5. Governance in the Family Business (c) Thomas Zellweger, 2017

  2. What are the four typical agency problems in family firms? • What are the central domains of family, ownership, corporate and wealth governance? • Explain the dynamic evolution of governance regulations in a family firm that moves successively through the following stages of corporate governance: owner-manager, sibling partnership, cousin consortium and finally, family enterprise. • Provide an example of how family governance problems may trickle down to the ownership level and finally impact the managerial level. (c) Thomas Zellweger, 2017

  3. Some family firms apply a branch structure to their decision-making. For instance, when selecting family members for the board of directors, they give each branch of the family tree the opportunity to appoint one person to the board. What are the potential advantages and disadvantages of this structure? • What are the advantages and disadvantages for next-generation family members when entering the family business at the shop floor, and what are the advantages and disadvantages of entering in a top management position? (c) Thomas Zellweger, 2017

  4. Should in-laws be included in ownership, or should they be excluded? Why? • What are the pros and cons of placing family wealth in a trust or foundation? • Over the last few years, Miller Ltd., a private manufacturing company, has grown significantly. The nonfamily CEO and CFO approach the family members regarding the possibility of setting up a share compensation scheme for the nonfamily top managers. As a family owner, what advantages and disadvantages do you see in this proposal? (c) Thomas Zellweger, 2017

  5. What is the overarching goal of setting up a family charter? • Describe the typical content of a family charter. • A business-owning family with multiple members owning a small portfolio of companies and assets approaches you because of your expertise in family governance. You are asked to advise the family in developing a family charter. How would you approach the task? Lay out a process model for how you would work with the family towards completing the charter. What are the issues to be addressed in the charter? (c) Thomas Zellweger, 2017

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