Perceptions about Boards in Sme Sized Family Businesses

Abstract

This paper reports on a study of the attitudes to the formation and roles of formalised active boards in Australian small to medium sized (SME) family businesses. While the literature on governance includes guidelines for effective boards, many family owned businesses perceive they are functioning adequately without formalising a board structure. This study employed a qualitative approach and explored the board functions of nine family business cases drawing on the Hilmer and Tricker (1994) framework. This framework summarises the roles of boards as: formulating strategy, setting policies, supervising executive management and providing accountability. Cases included those with and without active boards, some of which comprised solely non-independent (family) directors and others which included independent (non-family) membership. A review of the case studies identified perceived long-term ad-vantages in formalising boards in the small to medium sized family businesses, as well as some perceived disadvantages by those SME family businesses which were reluctant to adopt active boards. Overall, the case studies suggest that active boards of directors with a mix of family and outside directors can bring a wide range of bene-fits to SME family businesses including improving strategy, managing family emo-tional and loyalty stresses, and providing expertise that would otherwise be unavail-able or expensive.