Abstract
The objective of this case-based study is to understand how the dyadic interaction between the key governance actors can influence the decision-making aimed at directing and controlling a family firm. The study provides evidence that dyadic interaction at the back stage of the formal governance process can offer a privileged position for the family firm owners who serve on the board, and the non-family member Chair of the Board, to influence decision-making before, after and between board meetings. The cases studied suggest that dyadic interactions can serve as preparation for formal board processes and complement and clarify them, yet they also have the potential to conflict with them. Dyadic interaction is also shown to offer important relational and emotional benefits that may not necessarily be achieved through larger group interaction. The findings suggest that although the actors can self-regulate their behaviour through informal rules, the rules may imperfectly address one risk of dyadic interaction—the reduced cognitive conflict among the board.
Highlights
Literature and research have long emphasised formal governance mechanisms as means to direct and control firms
We argue that a case-based approach utilising highly granular data on family firms could help explore the dynamics of these behaviours and to understand their potential influence on family firm governance
In our study we focus on an informal process of family firm governance, the dyadic interaction of key governance actors of a family firm, the CEO, the chair and the owners, that takes place back-stage, in contrast to the front-stage group interaction of the formal board meetings
Summary
Literature and research have long emphasised formal governance mechanisms as means to direct and control firms. Recent studies on family or entrepreneurial firms have highlighted the role of dyadic (one-to-one) interactions between board members and the CEO and shown how these roles are enacted at the firm governance Examples such as those given by Garg and Eisenhardt (2017) and Sievinen et al (2019, 2020b) provide micro-level evidence that before the board makes decisions as a coalition, interactions between the individual board members and the CEO influencing the decision have taken place outside the boardroom. Such dyadic encounters between individuals have been conceptualised as fundamental units of interpersonal interactions (Kenny et al, 2006), and selected studies on corporate governance related meetings suggest that dyadic interaction has distinct dynamics compared to larger group interactions (e.g., Imam and Spence 2016; Johed and Catasús 2018; Solomon and Darby 2005; Solomon et al 2013)
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