Which corporate governance? This is my business

Abstract

With increasing corporate declines witnessed in the recent past, corporate governance is commonly sought as a panacea to corporate problems. Corporate governance has traditionally been viewed through the lenses of the agency theory with the firm being seen as a nexus of contracts and the main thrust being to investigate and delineate optimal shareholders and managers’ contracts. This view has largely been criticized for lack of a holistic view of corporate governance. Corporate governance involves a configuration of interdependent elements and therefore involves systems and practices that are embedded in institutional and legal frameworks. Corporate governance practices and systems, in line with institutional theory, are institutionally determined and directed and therefore effective corporate governance practices are contingent upon institutional environments in which the organizations and their stakeholders are rooted in. More specifically, organizations and their stakeholders’ behaviours arefounded on systems of norms and relationships that are culturally and socio-politically constructed. The effect of these norms and relationships may be more influential in the context of family firms. Families are considered the primary source of identityand provide interrelationships and social arrangements that allow people to pursue social life. Family systems and connections form core values and fundamental principles which underlie the family firm. Consequently, family core values influence the behaviour in the family enterprise. Additionally, family managers are associated with stewardship attitudes, altruism, shared values and attitudes and lower agency costs. However, this comes at the expense of weaker governance structures and neglect of other firm stakeholders. In line with this, it is imperative to explore the role of ownership and control in the development of corporate governance systems of family firms to comprehensively understand corporate governance in family firms