Family Firm Boards Research Articles

The composition of listed family firm boards in South Africa: Alignment to best practices and governance codes

Purpose: As elsewhere in the world, family firms (FFs) play a critical role in the South African economy. There is, however, scant research on how, if at all, listed South African FFs differ from their non-family counterparts concerning board composition and independence. The purpose of this study was to address this knowledge gap by investigating director and chair independence, chair-chief executive officer (CEO) role duality, board race and gender diversity, as well as board rotation at FFs listed on the Johannesburg Stock Exchange (JSE) over the period 2006 to 2022. The study was informed by the agency, socioemotional wealth, and stewardship theories.Design/methodology/approach: Data were collected on 753 directors who served on the boards of 37 JSE-listed FFs. Data sources included Bloomberg and the FFs’ integrated reports and websites. Data were analysed by examining trends in the considered variables over time.Findings/results: While family involvement at board level remained relatively constant, considerably fewer family members served as board chairs and CEOs towards the end of the research period. Board independence increased significantly over the research period.Practical implications: Shareholder activists’ requests for improved board governance of JSE-listed FFs seem justified. Activists should, however, also consider the benefits of family stewardship when evaluating director and chair independence in these firms. This study also identifies practical implications for nomination committees and investor education.Originality/value: The use of multiple theoretical lenses provides a balanced view of board governance at JSE-listed FFs. The study contributes to the scant body of knowledge on board composition and independence in listed FFs in South Africa, which will enable future FF research.

Women’s involvement on family firm boards of directors and their role in family business succession as seen through the lens of socio-emotional wealth and goal setting theory

L’avantage de la diversité des genres dans les conseils d’administration des entreprises familiales (EF) continue de susciter un intérêt croissant. Dans cet article, nous examinons les objectifs des femmes qui occupent un poste au sein du conseil d’administration d’une entreprise familiale. La fixation d’objectifs a été utilisée pour identifier ce qu’elles veulent accomplir ici. Comment font-elles la différence ? Nous répondons à cette question à travers le prisme théorique de la richesse socio-émotionnelle (SEW) et de la fixation d’objectifs. Nous contribuons à la littérature soutenant la diversité de genre dans la composition de conseils d’administration, soulignant les objectifs associés aux femmes dans les conseils d’administration des EF, et mettant en évidence leur rôle dans la succession des entreprises familiales.En s’appuyant sur la théorie du SEW et de la fixation d’objectifs, cette étude examine comment les objectifs des femmes influencent la succession. Guidées par la question de recherche, nos données rassemblent trois catégories d’objectifs poursuivis par les femmes dans les conseils d’administration.

Women directors in Italy: 1913–2017

Corporate elites have been male bastions until very recently and businesswomen have been very few and difficult to track. This paper addresses this topic by investigating the presence of women among the directors of the top 250 Italian joint-stock companies in eleven benchmark years spanning from 1913 to 2017. It shows a male preponderance throughout the period investigated. Women were nearly totally excluded from Italian boards until the end of the 20th century and their number showed a sizeable increase only after the turn of the century. Women also occupied marginal positions in the boards: very few of them held multiple directorships and the first female interlocker appeared only in 1972. In a country dominated by family capitalism, for a long time the very few women directors sat on the boards of family firms and were members of the families that owned these firms. The presence of women in Italian corporate boards was boosted in recent years by the introduction in 2011 of mandatory gender quotas for listed firms and for firms participated by the state. This law provided legitimacy to the appointment of women on boards also in other firms not affected by the new regulation. The massive increase in seats held by women led to a professionalisation of female directors in Italy, even though women are still largely excluded from top executive positions.

Conflicts in Boards of Family Firms: A Theoretical Framework for Strategic Decision-Making

Abstract Conflicts are social phenomena liable to occur in any organizational type; however, they're more intense (and less understood) in the family business dynamics, due to the unique psychodynamic effects of the interaction between family, management, and property. At the same time, conflicts can also be particularly salient in the ambiguous and complex context of boards (the black box of corporate governance), by the intimate connection with strategic decisions. Intersecting both areas, this study proposes a theoretical framework connecting antecedents and consequences of intragroup conflicts in the strategic decision-making process (especially in the decision quality), in the particular and favorable context of family firms board of directors. Based on deductive logic, relationships are built in view of the director' strategic counseling function, potentially raising the quality of strategic decisions by reducing the relational dimension and stimulating the organizational task-oriented discordance. Variables and constructs, suited to the specificities of the context under investigation, are proposed in direct and moderation relations under a contingency perspective.

Measuring the efficacy of board governance: Empirical evidence from Italian publicly listed companies

Recent progress in the literature shows that board efficacy might be signaled by lower firm performance variability in a firm’s income, since the board has a fiduciary duty to protect shareholder investments that may be affected when performance is variable. Our analysis is an attempt to contribute to this debate by extending it to include family firms. In particular, we detect appointments of directors to family firm boards within a sample of 483 observations (year/firm) regarding Italian publicly listed companies. Sampled family firms have one of the family members as CEO and/or chairman (in cases of non-CEO duality) of the firm’s board. The aim is to test predictions which suggest that the presence of independent (Agency Theory), on the one hand, and interlocking directors (Resource Dependence theory), on the other, have a significant impact on performance stability. Unlike agency theory, which affirms that independents are efficient, our findings suggest that the number of independents on the board of a family firm has no impact on performance stability. Instead, we find that interlocking directors can provide a significant contribution to the achieving of lower performance variability.

When Do Women Make a Better Table? Examining the Influence of Women Directors on Family Firm’s Corporate Social Performance

Our paper seeks to further understand the influence of gender board diversity on firms’ corporate social performance (CPS) in the context of publicly held family firms. Grounded on corporate governance and family firm literature, we argue that the influence of women directors on CSP will be contingent on their relative power and legitimacy within the board, and that such dynamics are particularly important in family firm boardrooms. Our empirical results show that increases in CSP associated with the presence of women in the boards of family firms are due mainly to the presence of outsider nonfamily and insider family women directors. Implications for the theory of family firms are discussed.

Family businesses and non-family equity: literature review and avenues for future research

Family firms commonly prefer internal funding and retention of control. Under certain circumstances, however, equity investments from outside the family can be a relevant alternative source of capital. To facilitate further knowledge about the interaction of family-owned businesses and external equity investors, the present work reviews 42 studies and suggests possible directions for future research. Results reveal that extant studies focus mainly on five key areas—corporate finance, contract design and collaboration, succession and exit route, strategy and performance, and corporate governance. Moreover, the paper discusses various gaps in the extant work and presents three opportunities for future research in a detailed manner. These include a comparison of different types of investors in the context of family-owned businesses, an investigation of minority investor exits from family firms, and an analysis of the impact of investors on family firm boards. All in all, the findings can guide the future development of this emerging field of research and have implications for theory and practice.

Bridge and Buffer: Evidence of the Role of the Board of Directors in Family Firms

In this paper we investigate the roles that boards of directors play in family firms by conducting a series of interviews with board members from various Italian family firms. Applying Grounded Theory methodology, our results suggest that in addition to performing the service and control functions characteristic of boards of directors in non-family firms, family firm boards perform two functions unique to family firms: i.e, they act as a bridge between the various family business components and as a buffer between conflicting members. Our study makes two contributions. First, by suggesting that family business boards play bridge and buffer roles, we fill the gap in previous literature which has examined the roles of boards of directors without considering the idiosyncratic nature of family- owned businesses. Second, we offer an overview of the variability in board roles across different forms of family business.

Board ownership and processes in family firms

This study examines how board ownership shapes board processes in family firms. The extant family firm research has extensively adopted an input–output approach to the study of boards, but results have been inconclusive, calling for further research on intervening processes. By examining board ownership, this study shows that board processes are shaped by the life cycles of family firms across generations, as reflected in ownership dispersion among family directors: Cognitive conflict is the highest and the use of knowledge and skills is the lowest when the levels of balance in a board’s voting power are moderate, which occurs when the board mostly mirrors a sibling partnership. A discussion of this study’s findings contributes to the literature on family firm boards, work groups, and corporate governance.

Corporate board and board committee independence, firm performance, and family ownership concentration: An analysis based on Hong Kong firms

This study examines whether the relationship between corporate board and board committee independence and firm performance is moderated by the concentration of family ownership. Based on a sample of Hong Kong firms, we find no significant association between the independence of corporate boards or board committees and firm performance in family firms, whereas board independence is positively associated with firm performance in non-family firms. Additionally, our findings show that the proportion of independent directors on the corporate boards of family firms is lower than that of non-family firms, but we find no significant difference in the representation of independent directors on the key committees of corporate boards between family and non-family firms. Overall, these results suggest that the “one size fits all” approach required by the regulatory authorities for appointing independent directors on corporate boards may not necessarily enhance firm performance, especially for family firms. Thus, the requirement to appoint independent directors to the corporate boards of family firms needs to be reconsidered.

The Board's Strategic and Control Tasks; Family Firms and their Search for outside Directors to Support Growth: Empirical Evidence from Italian Publicly Listed Companies

This article analyses the appointments of outside directors to family firm boards within a sample of 423 observations (year/firm) regarding Italian publicly listed companies. The aim is to test predictions which suggest that efficient performance of control and service tasks by outside directors has positive effects on a company's capacity to raise capital and to grow. Unlike agency theory, which affirms that independents are efficient when performing functions of control, this article suggests that the adoption of outside directors who are also independent has no effect. The results of this research demonstrate that outside directors who have close ties with banks maintain valuable social capital with bankers in periods when such social capital is threatened by large investment policies requiring a great amount of bank financing.

Board composition in family-influenced firms: A dynamic perspective

This paper uses a sample of 76 family businesses in Tunisia to investigate the impact of the family firm dynamic on the composition of their boards of directors. We argue that whether or not a transition in ownership is planned, firms have different governance needs and characteristics depending on the generational phase. The empirical results show that board composition is positively influenced by both generational evolution and succession planning. This study provides evidence of an increase in the appointment of outside directors to boards of family firms from the third generation of ownership. This result implies that it is important to consider the generational phase and succession process of the family firm in order to better understand its governance system.

Do families shape corporate governance structures?

AbstractThis paper provides empirical evidence of family firm corporate governance structures, by examining a set of corporate governance characteristics of 132 non-financial Spanish listed firms. Results show that family firm boards present differential characteristics and that different patterns of family ownership configurations do not affect family firm corporate governance structures. We find that Spanish family firm boards are smaller than those in non-family firms. Family firm directors own a larger fraction of firm shares and have longer Chairman tenure than non-family firms, and family firms use fewer voluntary board committees – such as nomination and remuneration committees and executive committees. Besides, family firm boards and committees are biased towards insiders. Whether these differential characteristics affect other minority non-family shareholders negatively remains an open question.

Do families shape corporate governance structures?

AbstractThis paper provides empirical evidence of family firm corporate governance structures, by examining a set of corporate governance characteristics of 132 non-financial Spanish listed firms. Results show that family firm boards present differential characteristics and that different patterns of family ownership configurations do not affect family firm corporate governance structures. We find that Spanish family firm boards are smaller than those in non-family firms. Family firm directors own a larger fraction of firm shares and have longer Chairman tenure than non-family firms, and family firms use fewer voluntary board committees – such as nomination and remuneration committees and executive committees. Besides, family firm boards and committees are biased towards insiders. Whether these differential characteristics affect other minority non-family shareholders negatively remains an open question.

Some Comments on Family Firm Boards

Some Comments on Family Firm Boards

Understanding and Consulting to Family Business Boards

When the boards of family firms are active, their properties as groups shape the authority of the chief executive and the quality of advice that directors provide to management. An understanding of the group dynamics of the board and the board-management relationship helps to reach a satisfactory balance between family concerns and company interests. Boards of directors can improve their value to firms and to individual directors by developing a capacity for self-reflection.