governance in family owned business
TRANSCRIPT
Governance in family
owned business
Group members512 Priyanka Limbachiya
517 Richa Modi
536 Anjal Surana
537 Priyanka Tiwari
547 Aditi Warang
The Concept of Family
The word family is derived from latin word “familiar”
which means a group of people affiliated by
consanguinity, affinity or co-residence.
“ Family is the collective body of persons who live in one
house, under one head or manager, a household
including parents, children and servants and as the case
may be lodgers or boarders.”
“ It is the basic social unit consisting of parents and
children; considered as a group, whether dwelling
together or not.”
The Concept of Family
Business A successful transfer to the next generations.
It is closely held firm whose ownership and policy making
are dominated by members of an ‘emotional kinship
group’.
A firm whose ownership passes from one generations of a
family to another.
Facts of Indian Family Business Traders / money lenders switched to industry in late 19th
century.
Aggarwals & Guptas in the north, the Chettiars in the south,
the Parsees, Gujarati Jains & Banias, Muslim Khojas &
Memons in the west, & Marwaris all over the India.
In 1950, 18 Indian & 2 British families were owning 95%
businesses in India.
It includes Tata, Birla, Kirloskar, Shriman, Walchand, Thapar,
Mafatlal, Mahindra, Ramkrishnan, Singhania, Lalbahai,
Dalmia-Sahu, Jain, etc.
Characteristics of Indian Family
Business
Family relationship
Board of directors
Culture
Loyalty
Dedication
Members
Areas where family business tends to differ from
typical business infrastructure:
Roles
Leadership
Family involvement
Time
Sucession
Culture
Indian Family Business In
Today’s Changing Era
Forward Looking
Lack of Professionalism
Change Management
Family Owned Business In India
& Corporate Governance
Fiduciary Duties (Garret, 2003) The duty of legitimacy
The duty of upholding three values of corporate
governance
The duty of trust
The duty of upholding primary loyalty to the position
of director
The duty of care
The duty of critical review & independent thought
The duty of delivering the primary roles & tasks of the
board
The duty of protecting minority owner’s interests
The duty of corporate social responsibility
The duty of learning, developing & comminicating
Strength Of Indian Family Owned
Business Financial sacrifices
Strength of family relationship
Operations of family business
Capability to plan
Emphasis on quality & value
Weakness Of Family Owned
Business Unpreparedness for change
Owner becomes larger than the organization
Decision making
Proxy sons
Tolerance for mediocrity
Tentativeness to formalize & professionalize
Lack of strategic perspective
Advantages Of Family Owned
Business Common values
Strong commitment
Stability
Loyalty
Disadvantages Of Family Owned
Business
Family emotions
Family or business what comes first?
What to select? Succession planning or fair to all
approach
Retaining non-family professions
Myths About Family Business
Fraud Our people wouldn’t commit fraud
Fraud couldn’t happen to us – we are stableorganisations
If fraud occurred it will be discovered quickly
Damages wouldn’t be significant
Future & Growth Of Indian
Family Business Growth planning
Organisational design
Operational effectiveness
Leadership management
Compensation
Communication
Customer service
Risk management
Management & ownership tranisition
Global perspective
Conclusion Corporates should take proactive steps in creating an
independent mindset in the directors by sustained director
development activity.
The regulators should work on positive rather than stressing
on negatives.
They should initiate steps to create awareness among
companies and boards, investors and general public to
understand the importance of good governance.
Good governance practices are essential for global
investors to accelerate the growth of the economy.
Thankyou