Corporate Governance Characteristics
1. Title of the Research:
‘Corporate Governance Characteristics of Family Managed Companies in India’
2. Relevance of the study and present status of knowledge:
a. Introduction:
A family business may be company, partnership firm or any other form of business owned, controlled and operated by members of family (Sapovadia, 2014) Family business is the oldest and most common model of economic organization. .The vast majority of businesses throughout the world—from corner shops to multinational publicly listed organizations with hundreds of thousands of employees—can be considered family businesses (Carlock, Manfred and Elizabeth, 2007). Based on research of the Forbes 400 richest Americans, 44% of the Forbes 400 member fortunes were derived
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Family businesses can have owners who are not family members. Family businesses may also be managed by individuals who are not members of the family. However, family members are often involved in the operations of their family business in some capacity and, in smaller companies, usually one or more family members are the senior officers and managers.
One measure of their dominance is the proportion of family enterprises to registered companies; this is estimated to range from 75% in the UK to more than 90% in South Asia, Latin America and the Far and Middle East. So the effective control of the activities of the family controlled business can ensure the optimum utilization of economic recourses and share holders’ wealth maximization.
Distinctive Features of Family Business:
The family ownership can be differentiated from other forms or patterns of ownership, because of following distinct characteristics of family managed companies:
Owners define the value of the company.
The value of the company reflects the family value.
Relationships in a family business build on trust between owners and managers and mangers and the board of
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Governance structures and principles identify the distribution of rights and responsibilities among different participants in the corporation and include the rules and procedures for making decisions in corporate affairs. Corporate governance includes the processes through which corporations' objectives are set and pursued in the context of the social, regulatory and market environment. Governance mechanisms include monitoring the actions, policies, practices and decisions of corporations, their agents and affected stakeholders. Corporate governance practices are affected by attempts to align the interests of stakeholders (Tricker, 2009) The Securities and Exchange Board of India Committee on Corporate Governance defines corporate governance as the "acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. It is about commitment to values, about ethical business conduct and about making a distinction between personal & corporate funds in the management of a
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