Family influence in Maltese listed companies : the implications on corporate governance

Abstract

Purpose: The main aim of this study was to ascertain the characteristics of Maltese listed family-controlled and influenced entities, assess their family governance structures and recommend regulatory and other improvements. Despite the significance of family businesses in the Maltese scenario, no corporate governance recommendations target such listed entities and local research on such topic was found to be scarce. Design: This study adopted a mainly qualitative mixed-methods approach. Semi-structured interviews were held with 18 participants in charge of corporate governance in Maltese listed companies, of which 7 were representatives from listed family-controlled or influenced businesses and 11 were listed non-family business representatives. Findings: This study ascertained several characteristics associated with family businesses. A number of such characteristics were identified as being more specifically related to listed family businesses than others. With regards to the family governance structure, this study established that, prior to appointing directors, listed family businesses consider several matters which were also found likely to influence the performance of the Board and ultimately that of the entity. Moreover, with regards to family involvement in executive positions, it is clear that Maltese listed family businesses attempt to keep such involvement at a minimum. Therefore, the appointment of a family CEO was perceived as being far less ideal than that of a family non-executive Chairman. What was deemed most important is that, in no case would a listed family business have both a family CEO and a family nonexecutive Chairman. This study also concludes that, such entities do not, as yet, consider the possible introduction of particular governance measures that attempt to assist in managing family owners’ involvement in business affairs. Finally, the Code does not distinguish between listed family and non-family businesses. Yet, if the Code was to include family provisions, interviewees insisted that these should be applicable to all Maltese listed companies wherever relevant. Conclusions: The generic nature of the Code dims the significance of listed family businesses’ distinctive features and their implications on corporate governance. Family provisions need to be inserted within the Code to increase awareness on various family governance measures. Value: It is hoped that this study contributes towards increasing awareness about the distinctive features of Maltese listed family businesses and family governance mechanisms. Although the Code is not mandatory and listed companies may still opt not to apply family provisions, their insertion within the Code is believed to enhance their perceived value.