The issue of corporate governance in family-run business

Abstract

Corporate governance debates, very often proceed on the notion that issues of corporate governance only concern large listed companies and public entities, and fail to recognize that many issues of corporate governance affect all companies of whatever size or nature. As a nation, Malta experienced the introduction of 'Corporate Governance' fairly recently. The Malta Financial Services Authority prescribes guidelines about principles of corporate governance through the Code of Principles of Good Corporate Governance for listed companies and public interest companies. Whilst understanding that neither resources nor practical guidance is offered for multi-tasking managers of family-run businesses, this thesis seeks to encourage greater awareness of these principles at the level of private and family-run companies. The First Chapter outlines the inception of the corporate governance concept, the definition, the main corporate governance theories as well as its sources. Chapter Two gives a detailed explanation of the special characteristics which single out family-run businesses. The challenges, strengths and weaknesses to be dealt with by family-run business were also given heightened importance in order to show why adhering to corporate governance principles can be vital for such firms. Chapter Three, highlights the duties of directors and the notion of unfair prejudice as adequately provided for in the Maltese Companies Act, showing particularly the way Maltese and UK Courts dealt with small intra-family business disputes. Chapter Four seeks to provide a corporate governance model for family-run businesses whilst acknowledging that 'one size does not fit all'. Finally, Chapter Five deals with my personal views and judgments on the issue of corporate governance in family businesses and my vision on the possible ways to enhance the working efficiency of such concept. In-depth interviews with two business leaders were conducted, in order to assess the value that 4 they placed on corporate governance to preserve family unity and ensure that objectives and professional decisions are reached.