Importance of Corporate Governance in Family Business Assignment Help

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Introduction

Research Background

The purpose of this research proposal is to evaluate the importance and role of corporate governance in family-owned business. The adaptation of good governance is always considered to be important and beneficial in any business, irrespective of its size and scope. Good governance practice can strengthen the internal and external business structure and operational approach of companies by developing relationship with the investors, managers and the employees (Brenes, Madrigal & Requena, 2011). Proper implementation of corporate governance and guidelines in any business scenario allows companies to achieve capital at low cost, to maximise business growth and profitability margin by attracting the best human capitals. According to Neubauer & Lank (2016), "corporate governance can also promotes competitiveness within marketplaces and it acts as an antidote to any corporation". According to Aguilera & Crespi-Cladera, (2016), corporate governance is essentially involves in balancing the interest of company's many shareholders, suppliers, financiers, governments, communities, customers and so on. Though, to understand the notion in case of family business is considered to be a complex task, due to its structure in what managerial and governance aspects regards. Family business can be defined as an enterprise, which have functioned throughout the years and considered as an important elements for the economic developments of any countries. An estimated of 75% to 90% of the global GDP growth rate has depend on family owned business, 50 to 80% jobs, in majority of countries across the globe are created through the family business. In such scenario, the impact of corporate governance in family business is increasing significantly, specifically in most recent times by providing new insights and dynamics of governance and in decision making process of organisation (Lozano, Martínez & Pindado, 2016).

Research Aim and objectives

The aim of this research is to evaluate the role and the importance of proper corporate governance for the family-owned business
Research objectives:

The basic objectives of this research should be as follows:

- To evaluate the importance of CSR in family-owned business

- To examine the major challenges being faced by family owned companies

- To identify the need of corporate governance for family owned companies or business

Research Question

Main question:

Why and to what extent corporate governance has significant necessity in family owned business?

Sub-question:

- What is the importance of family owned business on economic development of a country?

- Is corporate governance has significant measure for the family-owned companies or business?

- What are the challenges being faced by any family-owned business?

- How and to what extent corporate governance can provide significant impact on the business, run by the family-owned companies?

Literature Review

Introduction

This chapter has focused over the concept and theory of corporate governance. Various existing sources have been reviewed to assess the need of corporate governance in family-owned businesses. By evaluating the existing studies the research gap with respect to study area has also been provided at the end of the discussions.

Concept of Corporate Governance

According to Neubauer & Lank, (2016), corporate governance is a set of processes, rules and practices which are followed by the business organizations for controlling and directing the operations of the business. Corporate governance helps in maintaining a suitable balance between the interests of the different stakeholders like financers, employees, customers, government, suppliers and so on. As per the views of Gnan, Montemerlo & Huse, (2015)., corporate governance assists in providing an appropriate framework for the attainment of the organizational objectives in an effective manner. Good corporate governance helps in ensuring economic growth and success for the organizations. Strong and well maintained corporate governance helps in maintaining the confidence of the investors which in turn assists in raising organizational capital effectively. The particular concept assists in reducing the capital costs of the business Lozano, Martínez & Pindado, (2016). A positive impact is built on the share price of the business. Through the implementation of better corporate governance it becomes easier to handle problems like corruptions, organizational risks, generation of wastes and different organizational mismanagement. On the basis of the findings of Sarbah & Xiao, (2015), it can be inferred that corporate governance helps to a great extent in developing and forming brand image and reputation for a particular organization.

Need of corporate governance in family-owned business

Family-owned businesses are quite common within the global business sector. A majority of the famous businesses like Walmart, Ford, Motorola, etc. are performing effectively in the market. These businesses are one of the potential players in their respective industrial sectors Aguilera & Crespi-Cladera, (2016). Therefore, it can be said that they are making important contribution towards the economic growth of the country in which they are operating. Thus, if such potential businesses are not governed effectively then it can adversely affect the economic growth of the host country. According to the findings of Goel, Jussila & Ikäheimonen, (2014), family-owned businesses need to sconsider and incorporate better corporate governance strategies in order to maintain sustainability within the highly competitive business environment. El-Kassar, ElGammal, & Fahed-Sreih, (2018) has highlighted the primary reason behind which most of the family-owned businesses lack an effective corporate governance framework. In case of such businesses the family members use to hold different managerial and executive positions. Non-family members serve other positions like workers, supervisors, and so on. Such decisions are taken because of the fear of losing control over the family business (Sikka, 2018). However, with the changes in the present business environment it has become the need of the hour to make decisions strategically rather than impulsively. In order to take strategic organizational decisions it is important to consider the benefits of strong corporate governance.

Challenges faced by family-owned business

Several challenges are being experienced by the family-owned businesses while carrying out operations within the market (Goel, Jussila & Ikäheimonen, 2014). Often it becomes difficult to win the trust of the investors. Presence of proper corporate governance can help in gaining the trust of the investors. The ownership is either restricted or concentrated which leads to risks of favouritism and nepotism thereby leading to business conflicts Dawson & Parada, (2019). Conflicts can arise over the aspect of controlling of the business. There are situations when after generations do not impart much interest in getting involved with family business. Organizational decisions can get impacted by familial emotions and this can negatively impact professional ethics Carney & Nason, (2018). Therefore, it can be seen from these discussions that corporate governance is very much needed in ensuring proper decision making and controlling of the entire business in an appropriate manner. Through the implementation of corporate governance strategies it will become easy for family-owned businesses to avoid corporate conflicts and maintain professional ethics within the organizational settings (Lozano, Martínez & Pindado, 2016).

Research Gap

It has been observed that the studies so far conducted have focused on certain aspects of corporate governance in family-owned businesses. Either the studies have tried to focus on the impact of presence of board of directors within the family businesses or they have focused on the benefits which will be achieved through the implementation of corporate governance. However, none of the studies have presented an overall impact of absence of corporate governance within a family-owned business. This study is trying to sum up the every possible impact of corporate governance on family-owned businesses. More precisely it can be said that the research study is focusing on the fact that why corporate governance is needed by the family-owned businesses.

Outline of study design and methods (Research Strategy and Methodology)

Research philosophy is another aspect that is important to develop a success and descriptive way to research. Positivism research philosophy will be chosen to focus on the current research investigation. It is important to focus on the research development to allow performance and establishing the research objectives (Kumar, 2019). Research approaches is important factor to investigate the research while selecting right availability of the research areas. In this study, deductive research approach will be identified for the current study, which allows the study analysing in a qualitative way to collect data for the research. Research design is conducted and chosen to develop the study systematically. In the current research, exploratory research design will be chosen to conduct the study by developing a suitable investigation. Exploratory research design is focused with both qualitative and quantitative type of research method will be chosen. It helps to focus on mixed methods of data collection (Taylor, Bogdan & DeVault, 2015).

Mixed method will be conducted for data collection and analysis for the study. Primary data will be collected by developing a quantitative and qualitative research from family owned businesses. Both primary and secondary data collection will be conducted in research. Interview will be conducted from the managers of family owned businesses and quantitative research and data collection will be conducted by developing the survey from the employees. Secondary data analysis will be conducted by getting information from secondary sources like articles, books, peer reviewed journals and internet sources. Data analysis will be conducted for both primary and secondary data collection by developing survey, interview analysis and thematic analysis for current research. Simple random sampling method will be chosen to focus on the survey respondents. The population size will be 10 to conduct the primary data collection method by survey.

Researcher will verify ethical consideration while maintaining the validity and confidentiality of the research data and information of the survey and interview participants. Researcher will not manipulate for temper any data, which will be collected from the survey and interview. Authentic and valid data will be established with ethical considerations and confidentiality of the data. Data protection act will be applied to authenticate the research data.

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