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