Guidelines for Family Business Boards of Directors

21 Pages Posted: 12 Jun 2006

See all articles by Suzanne Lane

Suzanne Lane

University of Pittsburgh - School of Education

Joseph H. Astrachan

Kennesaw State University - Michael J. Coles College of Business

Andrew Keyt

Loyola University of Chicago - School of Business Administration

Kristi A. McMillan

Kennesaw State University - Michael J. Coles College of Business

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Abstract

Governance reform of publicly held corporations is an important topic these days, but a critical subtext has been missing from this often searing debate. Namely, what is the significance of these governance reforms, de jure and de facto, for the publicly held corporations distant, smaller, but economically robust brethren - namely, the closely held, family-owned business? Should these family-owned entities be held to the same governance guidelines and standards that apply to those firms making up the ranks of the Fortune 500, for example? To put it another way, does one size fit all? We caution that many of the most popularized corporate governance practices may be detrimental to family businesses. Many of these recommendations may harm family unity or might be too complex for private firms, and many are applicable only to very large, public companies with dispersed ownership. Popular corporate governance practices are focused toward a market model of corporate governance, found prevalently in the United States and United Kingdom, which involves companies with a widely dispersed shareholder base and a majority of independent, outside board members. In contrast, the typical family-owned business exhibits characteristics of the control model of corporate governance, found prevalently in continental Europe, Latin America, and Asia, which involves companies with a concentrated shareholder base and family member insiders active in management and the board. As a result of these differences, many of the new laws and recommendations may actually be harmful to family-owned businesses.

Suggested Citation

Lane, Suzanne and Astrachan, Joseph H. and Keyt, Andrew and McMillan, Kristi A., Guidelines for Family Business Boards of Directors. Family Business Review, Vol. 19, No. 2, pp. 147-167, June 2006, Available at SSRN: https://ssrn.com/abstract=907695 or http://dx.doi.org/10.1111/j.1741-6248.2006.00052.x

Suzanne Lane (Contact Author)

University of Pittsburgh - School of Education ( email )

United States
412-648-7095 (Phone)

HOME PAGE: http://www.education.pitt.edu/people/SuzanneLane/index.aspx

Joseph H. Astrachan

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States

Andrew Keyt

Loyola University of Chicago - School of Business Administration ( email )

820 North Michigan Avenue
Chicago, IL 60611
United States
312-915-6490 (Phone)

HOME PAGE: http://www.sba.luc.edu/faculty/facultydetail.cfm?EID=akeyt@luc.edu

Kristi A. McMillan

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States

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