Family Business Essay

Topics: Board of directors, Corporate governance, Governance Pages: 11 (3049 words) Published: May 21, 2011
Management Issues In The Family Business


Dominique Swaffin-Smith

Word count:

Submitted by
E Pahlsson


1. Theory of discussion
2. Corporate governance
3. Family governance
4. Social responsibility
5. Philantrophy
6. Financial performance
7. Berry Bros & Rudd limited
8. Conclusion


This report is intended to provide the reader with a discussion of the core areas of interest in terms of assessing a family companies performance. We have selected, Berry Bros & Rudd Limited to assess the family governance, corporate governance and social responsibility. The report starts with a brief illustration of interesting areas of the family business continuing with an overview of the family business and a final analysis providing the reader with unique governance systems and social responsibility taken to a wide extent to make a perfect example of contributing to corporate performance, externally and internally, among employees, shareholders and suppliers.

Corporate governance

Corporate Governance is the principle by which the board is expected to effectively oversee and direct the activities of the corporation. Corporate Governance refers to the relationship the relationship between the corporation and the shareholders, and the ability of the company board/ executive to meet shareholders’ need and that the corporation will meet all of its legal and ethical requirements. Corporate Governance involves the responsibility of the corporation to meet the needs of employees, family or non-family members, other stakeholders and the society in general. ( Anand,2009) By adapting an effective corporate governance system it enables a family company to solve the challenges easier. Corporate governance generates a sense of direction and tells the organizations members how they should behave or how they should behave or what they should do in certain circumstances. In addition a well-developed corporate governance structure brings the right people together at the right time to discuss the right important things. (poza,2010)

The agency theory refers to the best practice for organizing the relationship between the principal and the agent. Research indicates that family firms have increased agency costs due to the inability to manage conflict among family members, owner-managers, shareholders and non-family managers. Other potential agency costs could emerge as a result of reluctance of the CEO to transfer knowledge and power to the rest of the family. According to the agency theory, a corporation’s board is an important mechanism for limiting agency costs and reduce possible conflicts. A well developed system of Corporate Governance, and management, aids the control of agency costs and running the family business. It is important to include non-family members on corporate boards to ensure the boards independence from top management.( Poza, 2010)

According to Anand, 2008 there are some principles family firms can follow to develop an effective corporate governance system. It is important that the boards are sufficiently independent. This means that there must be separation of the roles of the CEO and chairperson, and also the board of directors. In addition accountability among all family members and non-family members must exist as part of the Corporate Governance system. Finally, it is important to create a reputation to foster a strong relationship between the company and the public.

Family Governance

An effective and well-functioning family governance structure provides the family members with increased communication, trust, ability to solve problems before they occur, succession planning, solve money matters and commit to a set of unique values and mission approved of all family members.
According to Aronoff and Ward (2008) family governance should focus on some or all of eight key areas of family concers....

Bibliography: Anand,S (2008). Essentials of Corporate Governance. New Jersey: John Wiley & Sons. p79-90.
Aronoff,C.E and Ward, J.L (2008). Family Business Governance. Maximizing Family and Business Potential. 2nd ed. London: Wiley
Ciconte, B.L and Jacob. J.G (2009). Fundraising Basics, A complete Guide. 3rd ed. Sudbury: Jones and Bartlett Publishers. p34-36.
Wickham, P.A (2000). Financial Times Corporate Strategy Casebook. Harlow: Pearson Education Limited. p 134-137.
Tierney, T.J and Fleishman, J.L (2011). Give Smart: Philanthropy That Gets Results. United States: Marrathon Production Services. p.1-2.
Poza,E.J (2010). Family Business. 3rd ed. Canada: South-Western Cengage Learning.
Rainey,D.L (2006). Sustainable business development. Cambridge: University Press.p 34-36, 55.
Kotler, P and Lee,N (2005). Corporate Social Responsibility. New Jersey: John Wiley & Sons. p32-35.
J.P Morgan IFB Family Business Honours 2010, Case studies of 2010 winners, viewed on 18th of May.2010
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