Opportunities and Resources in Latin America
Edited by Mattias Nordqvist, Giuseppe Marzano, Esteban R. Brenes, Gonzalo Jiménez and Maria Fonseca-Paredes
Chapter 4: Governance Structures and Entrepreneurial Performance in Family Firms: An Exploratory Study of Latin American Family Firms
Patricia Monteferrante M. and Ramón Piñango E. INTRODUCTION Corporate governance has emerged in the last 20 years as a relevant issue in relation to organizational management and effectiveness. This topic seems to be particularly important in the case of family firms because of the complexity of relationships between family members, different kinds of stockholders and management. In Latin America, most family firms are not listed on the stock exchange since ownership is concentrated in the hands of a family group. In this context, corporate governance practices are circumscribed exclusively by what each country’s legal system establishes, which usually requires the conformation of a board of directors with certain characteristics including the participation of external directors. The autonomy of these external members is easily eluded in most Latin American countries since they usually have some sort of ties with the family owner of the firm. This possible distortion diminishes to a certain degree when the companies are listed on the stock exchange since they are then subject to legal requirements, additional regulations and public scrutiny by the media and the community at large. The literature on corporate governance has clearly suggested that if it is true that governance is very important for non-family firms, it is even more so in the case of family businesses. The arguments that underlie this statement are mainly supported by the first theoretical approaches, which perceive family firms as a unit in which two social systems, the family and the firm, coincide, interact and...
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