Governance Issues in a Family Business - Research Paper Example

despite the fast phase changes in the modern period, the significant and integral role of the family in the economic activities of the society remains undeterred (Aldrich & Cliff, 2003). Of the several facets manifesting the integral role of the family in the society, the influence of family on business, in terms of firm creation and management, is no longer limited to small businesses, but it also consists of large corporations with families holding majority shares (Steier, Chrisman & Chua, 2004).

This scenario is observed not only in the United States and in Europe, but it is also an event that has become perceptible in China, Japan and other Asian countries (Steier et al., 2004). As such, it can be claimed that there is a pervasive participation of families in the establishment and management of economic institutions that redefines the role of families in economic organisations and activities as well as in organisational life (Aldrich & Cliff, 2003; Morck & Nakamura, 2003; Steier et al., 2004).In this context, family-owned business (FOB), just like non-family owned business, requires effective governance for the firm to achieve continued growth and success.

Implementation of policies, strategies and management by family founders/owners are geared towards attaining efficient and effective governance that will sustain and maintain the family corporation (Angus, 2005). Effective FOB governance is essential not only in handling organisational issues and in wealth management of the FOB, but it is also necessary in handle for conflicts arising from family relations involved in the business (Moore& Juenemann, 2008).Family owned businesses play a crucial role in economic activities across the globe (Steier et al, 2004).

Families creating and managing their own businesses have become pervasive and it is clearly manifest in many developing countries (Ramachandra & Merisetty, 2009).