‘Helping the family’: The mediating role of outside directors in ethnic Chinese family firms

Abstract

This article explores the nature and process of non-executive director (NED or non-executive) influence in quoted, familycontrolled firms (FCFs) through two company case studies in Singapore. Existing views of the non-executive role in such firms have been derived from theory, with traditional and ‘new’ agency approaches and resource dependence theory each offering differing prescriptions of the role. The article reviews this literature and suggests the potential value of qualitative research for understanding and reconciling competing prescriptions of the NED role. It then presents two case studies which explore the processes whereby independent non-executives seek to influence decision-making during critical incidents in the life of two FCFs. Based on these cases the article critiques the zero-sum view of power and the ‘nuclear’ conception of the family that informs much of the suspicious and hostile perspective of family control held by some agency scholars. In contrast, the article argues for a relational conception of power through which NEDs, despite the reality of family power and control, achieve effective influence through playing a vital mediating role in a web of firm and family relationships. This involves NEDs in defending the collective interest in the continuity of an ‘extended’ family of the firm against the damaging intrusion of ‘family altruism’ and managerial opportunism. Such a role can augment the authority of nonexecutives and the board whilst allowing necessary changes to be implemented.

Is there an Expectations Gap in the Roles of Independent Directors? An Explorative Study of Listed Chinese Companies

“…I am here, as a director, to represent the interests of all shareholders', ID4 said. This echoes the finding by Ng and Roberts (2007) that IDs help sustain the continuation of the family-controlled Singaporean firm rather than protecting the minority interest (p. 305). Some IDs and IIs expressed particular concerns about the conflict of interest between minority shareholders and the company's long-term development, and argued that a focus on the interests of small shareholders might promote opportunistic behaviour and be harmful to all listed companies at large.…”

Does Family Involvement Influence Firm Performance? Exploring the Mediating Effects of Board Processes and Tasks

“…Owner-directors and representatives of the family will elevate effort norms through a direct monitoring role on boardroom activities. Moreover, in family firms, the dominance of shareholders inside the boardroom provides them significant influence over the appointment of nonfamily directors (Ng & Roberts, 2007). Accordingly, the family members will favor the appointment of either personal friends or persons with whom they have or share close personal relationships (Johannisson & Huse, 2000) and who, for this reason, will feel obliged to strengthen the family norms.…”

Bound by Laws, or by Values? A Multi‐Level and Cross‐National Approach to Understanding the Protection of Minority Owners in Family Firms

“…These same factors that make family firms unique create situations where minority owners (be they part of the family or not) are put at risk, depending on whether the family firm in question has an organizational culture that is stewardship-oriented or agency-oriented (Zahra et al, 2008). Agency and stewardship approaches have been examined in family firms around the globe, including North America (Davis, Allen, & Hayes, 2010;Eddleston & Kellermanns, 2007), Latin America (Cruz, Howorth, & Hamilton, 2013;Martínez, Stöhr, & Quiroga, 2007), Europe (Giovannini, 2010;Jara-Bertin, López-Iturriaga, & López-de-Foronda, 2008), East Asia (Peng & Jiang, 2010;Yoshikawa & Rasheed, 2010;Young et al, 2008), Southeast Asia (Ng & Roberts, 2007), and the Middle East (Wilson, 2006). Table 1 summarizes key differences between these two types of organizational culture.…”