The role of family governance and family councils as a success factor for long lasting family companies

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School of Business | Master's thesis
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Abstract: This paper examines the role of family governance and family councils as an informal governance body in Finnish family firms. It aims to explain whether family firms can secure their continuity and growth through effective family governance by using a family council. Four out of five businesses in Finland are family-controlled companies and every other family firm faces an ownership transfer within few years. However, the research shows that majority of successions fail largely due to the lack of strategic planning. Notable is though that on average, family firms seem to be more profitable than non-family firms. To secure the backbone of the economy of Finland and Finnish family-owned companies has never been as topical as now. This study is a qualitative action research. The multiple case study focuses on family governance, especially on family councils by using semi-structured interviews. Oy Karl Fazer Ab, Hartwall Capital Ltd. and Paulig Group Ltd. represent the case companies as the ownership is spread in their controlling families. The results suggest that organized family governance in family firms that have many owners pays off. A family council brings and keeps the owning family together and it educates and prepares the next generation. The Owners' council in turn, despite the high number of owners, ensures that owners have a common vision which is communicated to the board of directors. In this way, the official governance body knows how the owners want to take forward the business. These informal governance bodies, family councils and Owners' councils seem to contribute indirectly to the family company's success and continuity in the long term. The research findings suggest that the family ownership is an efficient ownership structure and to secure the continuity, creating a family governance structure is advisable especially to family firms who have a lot of owners in many generations.
ownership, family company, family governance, family council, continuity, agency theory
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