Corporate Governance in Family Businesses

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Corporate governance in family businesses is gaining popularity as a field of study among both family business and corporate governance researchers and scholars. However, there is a lack of consensus and a lack of understanding of the definition and role of corporate governance in family businesses. This chapter addresses this gap in four ways. First, it reviews the existing literature to construct a holistic and integrated definition of corporate governance in family businesses. This definition includes both the task-oriented and scope-oriented definitions of corporate governance in family businesses, including shareholders, multiple stakeholders, and control dimensions. Second, this chapter uses case study methodology to identify significant gaps in research, such as stakeholders, not stockholders, conflicts of interest due to succession and priority, lack of professionalization, and passive shareholders. Third, this chapter makes logical recommendations for future research, including all stakeholders, continuity research, professionalization, board of directors (BOD) composition and diversification, passive shareholders, and effects of varied institutional contexts. These recommendations will help scholars of corporate governance and family businesses adopt a context-specific approach to corporate governance in family businesses. If we look at the context of the study, the two Pakistani companies were selected by the authors based on convenient sampling. The authors have been working as consultants in these companies, and the study has its own limitations, biases, and benefits due to the deeper association of the authors with the selected companies. These companies have three major businesses in each of them. One company has a manufacturing setup of adhesives, foam, and apparel, whereas the other company has two major manufacturing units, including electronics and pharmaceuticals, and the third one is a resort. All these businesses operate out of Lahore, Punjab, Pakistan. Fourth, this chapter proposes a contextual framework to clarify the definition, complexity, and understanding of corporate governance in family businesses by adding new variables such as trust, transparency, value, respect, and willingness to do succession by the founder members and the leading generations.