Owners’ rule-based decision-making in family firm strategic renewal

The role of dyadic interactions between CEOs, chairs and owners in family firm governance

“…To avoid this, the actors in our case companies self-regulate their behaviour through informal rules. In line with the findings of Sievinen et al (2019Sievinen et al ( , 2020a, Westphal and Graebner (2010) and Westphal and Zajac (1998), our data shows that there are several rules-which are similar between the two companies-that are adopted by the governance actors in order to ensure that informal governance is aligned with what is considered 'good governance'. These rules define the conduct of governance roles and the data suggests that the actors found it important to emphasise their own as well as the other actors' commitment to them.…”

“…Unlike the non-family CEO and the chair, who typically are considered to enact only professional roles within the organisation, family firm owners are often perceived as having many roles in a family business context. These include being a family member and owner, as well as a board member and an (ex-)executive (Sievinen et al 2020a). Our data indicates that an owner may engage in lively internal dialogue as he or she assesses the role and its appropriateness in a family business context.…”

“…They have been proposed to be even more effective than the formal process in reaching similar ends (Astrachan 2010;Mustakallio et al 2002), and to have the potential to either reinforce or counteract the formal governance process (Chrisman et al 2018). Several scholars have also approached processes from the perspective of organisational and individual-level rules (March 1994, Mace 1971March and Olsen 1989;Sievinen et al 2020a;Ocasio 1993;Zhou 1993). While formal rules of governance include practices such as setting up board committees, informal rules can regulate how board members conduct political games inside and outside of the boardroom (Pettigrew and McNulty 1995).…”

“…Typical family firm characteristics also influence governance, including a trans-generational mindset, family members playing multiple roles as managers and owners, and non-financial matters detracting the focus from economic goals (Mustakallio et al 2002). As a result, informal mechanisms may play a different or a more important role in family firm governance than in other companies (Astrachan 2010;Cater and Schwab 2008;Sievinen et al 2020a).…”

“…Matters that depend on non-financial rationality can be discussed, and conflicts and negative emotions have additional arenas in which to be resolved. The ability to assume different roles besides that of a board member can increase the owner and the chair's response flexibility to issues that emerge in family firm governance (Sievinen et al 2020a).…”