Edited by Hemant Merchant
Chapter 11: Emerging paradigms of corporate governance and managerial professionalization in family firms
The majority of businesses, particularly in Asia, are family controlled and managed. Family businesses contribute immensely to the development of their nation’s economy. During the early stages of a family firm’s life cycle, managerial functions are mostly performed by members of the controlling family (Dyer & Handler, 1994). However, as the firm grows over time, business operations become increasingly complex and specialized. Systems and processes are required to be established for effective management of a growing business (Chandler, 1990; Casson, 2000; Walsh, 2010). Professionalization of family businesses becomes essential but remains incomplete unless it includes reforms in corporate governance. Formulation of a clear strategy, grooming of a professionalized organization and having leadership that practices high-quality governance are important mechanisms to preserve family businesses. However, the complex situation created by the interplay of multiple forces makes both professionalization and corporate governance quite challenging. This chapter describes the challenges family businesses face in professionalization of corporate governance and identifies two distinct approaches adopted by business families to achieve this objective.
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