Research on Corporate Governance Practices in Family-Owned Enterprises in India

01 Jan. 2022

Objectives and Need of the Study

The development of family business research as an autonomous academic field began with Donnelley’s article “The family business”, published in Harvard Business Review in 19641. He pointed to specific features of family businesses such as family members’ involvement in the business, consequences of their influence on key business success.

Factors, the composition of the management board or succession decisions (Zachary 20112). Thus, Donnelley defined a family business as follows:

A company is considered a family business when it has been closely identified with at least two generations of a family and when this link has had a mutual influence on company policy and on the interests and objective of the family.

The growing competitiveness in the market and with Family Businesses going public, the business or firm cannot avoid paper reviews the literature available with the aim to identify the weaknesses/ limitations of Family Businesses. The purpose of the study is to understand the various strategies and control mechanisms in place among the family businesses in India. The study will also discuss the various practices of governance such as ownership structures, board committees, evaluation methods, compliances, board diversity, etc. among the selected sample. Case studies would be prepared based on the best practices of corporate governance followed by family businesses in India. The following factors highlight the significance of corporate governance:



  •  Change in Shareholding Structure: As a result of changing shareholding patterns, ownership has presented management with new challenges. Institutional investors, both domestically and internationally, are becoming more significant in the capital formation process. Accepting governance has become essential in the current climate to boost credibility.
  • Economic Changes: Businesses must adapt to the shifting economic landscape to survive. They have realigned their interests and moved toward new goals and policies because of liberalization measures. They must contend with competition both domestically and abroad.
  • Globalization’s Impact: In the age of globalization, the world has shrunk to a relatively small market. The global economy and corporate landscape are undergoing significant changes. Challenges must be met by corporations. Professional management now dominates traditional management. The corporate world must therefore develop worldwide norms in order to combat the risks of globalization.
  • Shareholders’ Net Worth and Net Wealth: Any firm seeks to maximize wealth by maximizing profits. This improvement is the goal of effective corporate governance.
  • Reporting: Investors are requesting more and more disclosure from the corporation about financial reporting and transparency. They seek openness, responsibility, and accountability in all dealings. The business has a duty to safeguard its interests. The purposes of laws and regulations are to safeguard the interests of all stakeholders. The directors are believed to have a duty to be transparent in their accounting and work.