What are the corporate governance challenges for family businesses?:A comparison of the United Kingdom and China

Abstract

The family business is ubiquitous. Its prevalence in the various forms of capitalisms that exist is a clear indication of its importance. Even throughout China’s history and now within its version of a modern socialist market, the family business has proven to be a foundation of societies. In the United Kingdom (UK), family businesses have been successful and had steady growth thanks to a conducive macro-environment that consisted of a democratic political system, an advanced legal system and a Western socialcultural context. In contrast, China has a socialist and centralised political system. It has an inadequate legal framework for its private-sector and is set in a social-cultural context that has strong Confucian underpinnings. Such a macro-environment presented family businesses with immense challenges. Many of the challenges faced by family businesses in advanced Western countries have been addressed through a now healthy and functioning corporate governance framework. Such frameworks are well studied and established in countries such as the UK. China on the other hand, only began its corporate governance reform in the 1990s, mainly focusing on SOEs, and borrowing corporate governance literature from other developed countries. This thesis undertakes a comparative study of corporate governance challenges faced by family business within the macro-environments of China and the UK. A number of challenges faced by family businesses in China are analysed and shown to be intricately related, and so a holistic approach is recommended to find further solutions. By adapting and transplanting Western corporate governance mechanisms, it is possible that challenges can be overcome at an organisational level, despite the macroeconomic differences. Changes to the political and legal systems at a central government level are also proposed to improve the situation for family businesses over the long run.