Page 76 - Microsoft Word - 00 P1 IW Prelims.docx

Chapter 6

Ownership models and governance

structures

3.1 Family structures

A family structure exists where a family has a controlling number of
shares in a company.

Benefits

 Fewer agency costs – since the family is directly involved

 Ethics – threats to reputation are threats to family honour, increases the likely
level of ethical behaviour.

 Fewer short-term decisions – wealth already inherent in such families suggest
long-term growth is a bigger issue.

Problems

 Gene pool – the gene pool of expertise in owner managers must be questionable
over generations.

 Feuds – families fight, and this is an added element of cultural complexity

 Separation – families separate and this could be costly in terms of buying out
shareholding and restructuring.

70