This study posed several questions about the determinants of family business CEOs' perceptions of the board of directors. Specifically, the authors investigated whether the following factors played a role in determining the positive perception of their contribution by the family firm's CEO: the compensation structure of the board of directors of a family firm; the number of outside directors; the size of equity held by the board; and the directors' formal efforts for the benefit of the firm. It was found that the number of outside directors and their formal efforts for the firm played a significant role in determining the CEOs' perceptions of their contribution, whereas their compensation and size of equity had no effect on how they were perceived. This suggests that family business owners value the independent perspective that outside board members bring to a board. In addition, the results suggest that family business owners value (and are sensitive to) the effort board members put into the discharge of their duties. The evidence that independence in the board is highly valued provides reason for optimism about the continued survival, growth and adaptability of family businesses. Other research and practical implications of this study are also described.
AlderferC. P. (1988), ‘Understanding and consulting to family business boards’, Family Business Review, Vol 1, No 3, pp 249–261.
2.
Arthur Andersen/MassMutual (1997), American Family Business Survey.
3.
BaringG. (1992), Characteristics of Australian Family Business, Working Paper Series No 4/92, Monash University, Melbourne.
4.
BaysingerB. D.ButlerH. (1985), ‘Corporate governance and the board of directors: Performance effects of changes in board composition’, Journal of Law, Economics and Organizations, Vol 1, pp 101–124.
5.
BorkD. (1986), Family Business, Risky Business: How to Make it Work, AMACOM, New York.
6.
DancoL. A. (1975), Beyond Survival: A Business Owner's Guide for Success, Center for Family Business, Cleveland, OH.
7.
DancoL. A.JonovicD. J. (1981), Outside Directors in the Family-owned Business, The University Press, Cleveland, OH.
8.
DavisP. (1983), ‘Realizing the potential of the family business’, Organizational Dynamics, Vol 12, pp 47–56.
9.
DembA.NeubauerF. F. (1992), The Corporate Board, Oxford University Press, New York.
10.
EisenhardtK. (1989), ‘Agency theory: An assessment and review’, Academy of Management Review, Vol 14, pp 57–74.
11.
FamaE. F.JensenM. C. (1983), ‘Separation of ownership and control’, Journal of Law and Economics, Vol 26, pp 301–325.
12.
FinkelsteinS.HambrickD. C. (1996), Strategic Leadership: Top Executives and their Effects on Organizations, West, Minneapolis/St Paul, MN.
13.
FlorenR. H. (1998), ‘The significance of family business in the Netherlands’, Family Business Review, Vol 11, No 2, pp 121–134.
14.
FordR. H. (1988), ‘Outside directors and the privately owned firm: Are they necessary?’Entrepreneurship, Theory and Practice, Vol 13, No 1, pp 49–57.
15.
Gomez-MejiaL. R.BalkinD. B. (1992), Compensation, Organizational Strategy, and Firm Performance, Southwestern, Cincinnati, OH.
16.
GumpertD. E.BoydD. P. (1984), ‘The loneliness of the small business owner’, Harvard Business Review, Vol 62, No 6, pp 18–24.
17.
HarrisD. (1989), ‘Some comments on family firm boards’, Family Business Review, Vol 2, No 2, pp 150–152.
18.
HarrisD.MartinezJ. I.WardJ. (1994), ‘Is strategy different for the family-owned business?’Family Business Review, Vol 7, No 2, pp 159–174.
19.
HeidrichG. W. (1988), ‘Selecting outside directors’, Family Business Review, Vol 1, No 3, pp 271–285.
20.
HollandP. G.BoultonW. R. (1984), ‘Balancing the “family” and the “business” in the family business’, Business Horizons, Vol 27, pp 16–21.
21.
JainS. K. (1980), ‘Look to outsiders to strengthen business boards’, Harvard Business Review, Vol 58, No 4, pp 162–170.
22.
JamesH. S.Jr (1999), ‘What can the family contribute to business? Examining contractual relationships’, Family Business Review, Vol 12, No 1, pp 61–71.
23.
JensenM. C.MecklingW. H. (1976), ‘Theory of the firm: Managerial behavior, agency costs, and ownership structure’, Journal of Financial Economics, Vol 3, pp 305–360.
24.
JensenM.MurphyK. J. (1990), ‘Performance pay and top management incentives’, Journal of Political Economy, Vol 98, pp 225–264.
25.
JohnsonJ. L.DailyC. M.EllstrandA. E. (1996), ‘Boards of directors: A review and research agenda’, Journal of Management, Vol 22, pp 409–438.
26.
JonovicD. L. (1989), ‘Outside review in a wider context: An alternative to the classic board’, Family Business Review, Vol 2, No 2, pp 125–140.
27.
KosnikR. (1990), ‘Effects of board demography and directors' incentives on corporate greenmail decisions’, Academy of Management Journal, Vol 33, pp 129–150.
28.
LaneS. H. (1989), ‘An organizational development/teambuilding approach to consultation with family businesses’, Family Business Review, Vol 2, No 1, pp 5–16.
29.
LankA. B. (1995), Key Challenges Facing Family Enterprises, IMD Publication, Lausanne, Switzerland.
30.
LansbergI. (1988), ‘The succession conspiracy’, Family Business Review, Vol 1, No 2, pp 119–143.
31.
LeaJ. W. (1998), ‘A family business with principles also has vision’, Washington Business Journal, Vol 17, No 20.
32.
LorschJ. W.MacIverE. (1989), Pawns or Potentates, Harvard Business School Press, Boston, MA.
33.
MaceM. L. (1971), Directors: Myth and Reality, Division of Research, Harvard Business School, Boston, MA.
34.
MathileC. L. (1988), ‘A business owner's perspective on outside boards’, Family Business Review, Vol 1, No 3, pp 231–237.
35.
MehranH. (1995), ‘Executive compensation structure, ownership, and firm performance’, Journal of Financial Economics, Vol 38, No 2, pp 163–175.
36.
MeyerJ. W.RowanB. (1977), ‘Institutional organizations: Formal structures as myth and ceremony’, American Journal of Sociology, Vol 83, pp 340–363.
37.
MuellerR. K. (1988), ‘Differential directorship: Special sensitivities and roles for serving the family business board’, Family Business Review, Vol 1, No 3, pp 239–247.
38.
NashJ. M. (1988), ‘Boards of privately held companies. Their responsibilities and structure’, Family Business Review, Vol 1, No 3, pp 263–270.
39.
OuchiW. G. (1977), ‘The relationship between organizational structure and organizational control’, Administrative Science Quarterly, Vol 20, pp 559–569.
40.
OuchiW. G. (1979), ‘A conceptual framework for the design of organizational control mechanisms’, Management Science, Vol 25, pp 833–848.
41.
PozaE. J. (1995), ‘Global competition and the family-owned business in Latin America’, Family Business Review, Vol 8, No 4, pp 301–311.
42.
RabinB. (1994), ‘Measuring compensation structure: An application to executive pay’, Compensation and Benefits Management, Vol 10, No 4, pp 30–40.
43.
RajagopalanN. (1997), ‘Strategic orientations, incentive plan adoptions and firm performance: Evidence from electric utility firms’, Strategic Management Journal, Vol 18, pp 761–785.
44.
ScheinE. H. (1983), ‘The role of the founder in creating organizational culture’, Organizational Dynamics, Summer.
45.
SchwartzM. A.BarnesL. B. (1991), ‘Outside boards and family businesses: Another look’, Family Business Review, Vol 4, No 3, pp 269–285.
46.
ShankarM. C.AstrachanJ. H. (1996), ‘Myths and realities: Family businesses' contribution to the U.S. economy. A framework for assessing family business statistics’, Family Business Review, Vol 2, No 9, pp 107–119.
47.
SharmaP.ChrismanJ. J.ChuaJ. H. (1997), ‘Strategic management of the family business: Past research and future challenges’, Family Business Review, Vol 10, No 1, pp 1–35.
48.
Stoy Hayward (1989), Staying the Course, Stoy Hayward, London.
49.
TaguiriR.DavisJ. A. (1992), ‘On the goals of successful family companies’, Family Business Review, Vol 3, No 1, pp 43–62.
50.
UmanathN. S.RayM. R.CampbellT. L. (1996), ‘The effect of uncertainty and information asymmetry on the structure of compensation contracts: A test of competing models’, Management Science, Vol 42, No 6, pp 868–875.
51.
US Small Business Administration (1997), The State of Small Business: A Report to the President, US Government Printing Office, Washington, DC.
52.
WardJ. L. (1987), Keeping the Family Business Healthy, Jossey-Bass, San Francisco, CA.
53.
WardJ. L. (1992), Creating Effective Boards for Private Enterprise, Jossey-Bass, San Francisco, CA.
54.
WardJ. L.HandyJ. L. (1988), ‘A survey of board practices’, Family Business Review, Vol 1, No 3, pp 289–308.
55.
ZahraS. A.PearceI. I. (1989), ‘Boards of directors and corporate financial performance: A review and integrative model’, Journal of Management, Vol 15, pp 291–334.
