SELF-CONTROL THROUGH BOARD CONTROL: FORMALIZED GOVERNANCE IN CONTROLLING OWNER FAMILY BUSINESSES

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Abstract

Our study examines the role of board control tasks in mitigating self-control problems in controlling owner family businesses. We challenge the common perception that controlling owners do not require and use board control because of the concentration of ownership and management in a single individual. We argue that self-control problems, that is agency problems with oneself, have often been overlooked by existing studies on the relevance of control tasks. By using a multiple case study design, we demonstrate that controlling owners frequently use board control as a self-governing mechanism and develop several propositions on favorable board processes and compositions. Rather than independence, we propose that controlling owners should select their board members based on trust and expertise. Moreover, we propose that probing and challenging behavior by board members in combination with the controlling owner’s willingness to prepare in a formalized manner support the reduction of self-control problems.

Keywords: Family Business, Board of Directors, Small and Medium-Sized, Agency Costs, Self-Control Problems

Date received: 15 October 2016

Date accepted: 13 December 2016

How to cite this paper: Baumann, M., & Stubner, S. (2017). Self-control through board control: formalized governance in controlling owner family businesses. Corporate Ownership & Control, 14(2), 123-136. https://doi.org/10.22495/cocv14i2art12