The Relationship Between The Governance Structure Of Family Firms And The Direction And Strategy Of These Small And Medium Sized Enterprises

Family: the business can succumb to the familial conflicts over succession, money, or any other problem. The family should ensure the transmission, from generation to another, of the sense of commitment, and to permeate their ethos. Developing and respecting financial and managerial

Type II agency problems are prevalent in family owned public corporations because the controlling shareholders (the family) may prioritize their personal interests over the interests of the corporation as a whole.

The corporate ownership structure is the most popular structure for large companies. Often when family is involved, unnecessary family issues can interfere with the business. Corporate ownership keeps employees competitive, as their jobs within

Suppose the buyer for a residential construction company wants to buy a tractor from either Caterpillar or Komatsu. After evaluating the two tractors, he decides that Caterpillar has greater product benefits, based on perceived reliability, durability, performance, and resale value. He also decides that Caterpillar’s personnel are more knowledgeable and perceives that the company will provide better services, such as maintenance. Finally, he places higher value on Caterpillar’s corporate image. He adds up all the benefits from these four sources—product, services, personnel, and image—and perceives Caterpillar as delivering greater customer benefits. The buyer also examines his total cost of transacting with Caterpillar versus Komatsu, including money plus the time, energy, and psychic costs expended in product acquisition, usage, maintenance, ownership, and disposal. Then the buyer compares Caterpillar’s total customer cost to its total customer benefits and Komatsu’s total customer cost to its total customer benefits. In the end, the buyer will buy from the source he thinks delivers the highest perceived value.

Traditionally, corporate governance has evolved around the contract theory and agency problem based on separation of ownership and management (Dube, 2011). The benefits of this separation derive from the monitoring by the board of the CEO activity in the interest of shareholders, and generally in the interest of all stakeholders. There is a need here to first know what the agency theory is.

In order to distinguish family-controlled and non-family-controlled firms, I apply the family-controlled business criteria proposed by The Family Business Magazine: a single family controls the company’s ownership, the controlling family members are active in the top management, and the family has been involved in the company for at least two generations. Family businesses constitute a highly important component of the US business community. An estimated 80 percent of the total 15 million businesses within the American economy are family businesses. In the US, 50 percent to 60 percent of the total Gross National Product are provided by family-controlled firms. The other 40 percent to 50 percent is supplied by non-family-controlled firms.

That is why in companies there is a delegation of power -> Effective ownership, i.e., effective control of property, is thus legally concentrated in man agement's hands. This is the first legal modification, and it takes place in recognition of the high negotiating costs that would otherwise obtain the corporation should fail, partnership law commits each shareholder to meet the debts of the corporation up to the limits of his financial ability. Thus, managerial de facto ownership can have considerable external effects on

The greatest threats to the progress, success and endurance of the family firm are familial relationships. Stakeholders which are mainly considered in the planning process are spouse, children, employees and their families, vendors, suppliers, consumers and the community. It is important to ensure that if there is going to be a transition in leadership, the people who are selected are well-qualified enough. Not only are the employees to be considered, but their families who are dependent on them should be considered as well. The success of customers, suppliers and vendors is entirely dependent on the degree of success of the family firm. They have an indirect investment in your company. The community is dependent on your financial as well as social deeds. Contribution of services and manpower, charity, and taxes make you an important part of the community, and the community comes to depend on the organization.

Family firms face great difficulties while searching for a family successor. However, if done rightly, it is more advantageous to the

“A Chicago teenager is looking for fun at home while his parents are away, but the situation quickly gets out of hand” (IMDB, 2014). This is the logline for the Tom Cruise movie Risky Business. In the wake of the global economic crisis, questions are being asked if company’s were just having too much fun while the parents were away. Effective corporate governance and risk management are two systems that can help a company achieve greater productivity, profitability and growth. If mismanaged, they can possibly cause said company to collapse or negatively affect all stakeholders. Across the theoretical literature, there has been a shift in attitudes and now some question whether corporate governance was really at the core of the fault of the global economic crisis. It is presented that despite these growing literary trends, both corporate governance and risk management are causally linked and an imperative for the sme, new start up or global corporation. In addressing this issue, Risk management and corporate governance will be examined in detail with reference to current literature, opinion and supported by a few key case studies.

According to Jones, 2003; Walker & Brown, 2004 as cited by Wallace, Jeffrey S (2010) it is important to use both objective and subjective methods to define family firms. To make this a conclusive study we shall consider reports from all over the globe and use it in a way which gives clear rationale to our selected topic which would create a debate relating to how and why are family firms enabled in innovating or as to why they are frustrated in innovating.

Outline the corporate governance practices of small businesses in Australia? Compare and evaluate the role of owners and managers.

Moreover, the percentage of family members on the board means, that the agency theory argues diffused ownership environment, firms will disclose more information to reduce agency costs and information irregularity. According to this hypothesis testing, non-executive directors and the existence of an audit committee representation have been more dominant in the Hong Kong companies. Over the period of this research that the writers have collected and serves more than 610 top personalities in the listed firms in the Hong Kong. On top of that, the writers further sent off additional questionaries 535 to the financial analysis in the top financial and brokerage firms in the Hong Kong. The main objective is testing and reliability of perception

The decisions of the CEO of the family-controlled company must concentrate on how to make benefits to the next generation, meaning that different strategic choice is dictated by the familial obligations. As Nicolas Kachaner, George Stalk, and Alain Bloch mentioned in their article “What You Can Learn from Family Business”: “Executives of family businesses often invest with a 10- or 20-year horizon, concentrating on what they can do now to benefit the next generation.” [6]

PhD Katarina Djulic is Assistant Professor at FEFA on subjects of Corporate Finance and Corporate Governance. She also works as Senior Consultant in KPMG Serbia. She worked as an Associate Operations Officer at the International Finance Corporation, World Bank Group, on the Corporate Governance Program. She holds a Bachelor of Law from the University of Belgrade, a Master of Law (LL.M.) from Northwestern University, a Master in Public Policy from Harvard University JFK School of Government, and a PhD degree from the University of