![Page 1: BLOOD IN THE BOARD ROOM: FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD](https://reader036.vdocument.in/reader036/viewer/2022062720/56813429550346895d9b17d2/html5/thumbnails/1.jpg)
BLOOD IN THE BOARD ROOM:
FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD
Sven-Olof Collin Jenny Ahlberg Jonas Gabrielsson
![Page 2: BLOOD IN THE BOARD ROOM: FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD](https://reader036.vdocument.in/reader036/viewer/2022062720/56813429550346895d9b17d2/html5/thumbnails/2.jpg)
Smithsonian firm Marxian firm
Family firm
![Page 3: BLOOD IN THE BOARD ROOM: FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD](https://reader036.vdocument.in/reader036/viewer/2022062720/56813429550346895d9b17d2/html5/thumbnails/3.jpg)
“Nepotism is just fine, as long as it is kept within the family”
Familiness of the firm
Ownership structure
Family governance of the firm
Managerial labor market
Capital structure Strategy Structure
Audit
Board of directors
![Page 4: BLOOD IN THE BOARD ROOM: FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD](https://reader036.vdocument.in/reader036/viewer/2022062720/56813429550346895d9b17d2/html5/thumbnails/4.jpg)
Family
Blood,i.e.
Nepotism
Board functions
Control
Resource provision
Decision making
Conflict resolution
Do blood relationships at the board influence the functions of the board?
![Page 5: BLOOD IN THE BOARD ROOM: FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD](https://reader036.vdocument.in/reader036/viewer/2022062720/56813429550346895d9b17d2/html5/thumbnails/5.jpg)
Family and genetics
A firm dominated by a family - A firm for a family
=> family governance and family nepotism
Inclusive fitness
Genetic relatedness, factor r
- 0,5 parent, child, full sibling, dizygotic twin
- 0,25 half-sibling, grandparent, grandchild, avuncular relationships
- 0,125 cousin, great grandparents, great grandchildren, great aunt/uncle
![Page 6: BLOOD IN THE BOARD ROOM: FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD](https://reader036.vdocument.in/reader036/viewer/2022062720/56813429550346895d9b17d2/html5/thumbnails/6.jpg)
The effect of nepotism
Simplifications
Nepotism suggested to affect individual and group behavior
– genetic relatedness and socialization
Silent assumption in family firm research
Generation
![Page 7: BLOOD IN THE BOARD ROOM: FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD](https://reader036.vdocument.in/reader036/viewer/2022062720/56813429550346895d9b17d2/html5/thumbnails/7.jpg)
The board
Board functions
- control
- decision making
- resource provision
- conflict resolution
Presence of factor r will influence the orientation towards the four functions as well as the overall activity
Family coefficient
![Page 8: BLOOD IN THE BOARD ROOM: FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD](https://reader036.vdocument.in/reader036/viewer/2022062720/56813429550346895d9b17d2/html5/thumbnails/8.jpg)
Hypothesis
Control Decision Resource Conflict Activityr=0,5 (sibling, parent) - + - - +r=0,25 (grandparent, uncle) - - - - -r=0,125 (cousin) + - + + +Family coefficient - n n - -
![Page 9: BLOOD IN THE BOARD ROOM: FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD](https://reader036.vdocument.in/reader036/viewer/2022062720/56813429550346895d9b17d2/html5/thumbnails/9.jpg)
SampleNo files of family firms
‘Shotgun’ approach
Stepwise surveys
First survey:
– 14.421 corporations, selected 1.400 corp + 422 corp from a list of gazelle corporations => 1704 corporations
– 278 responses (16.3% response rate)
Selected family>50% shares AND considered to be family firm by CEO or owner =>148 corporations
Second survey = ‘blood survey’
– 68 usable responses, i.e., final response rate = 4%
=> Explorative study
![Page 10: BLOOD IN THE BOARD ROOM: FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD](https://reader036.vdocument.in/reader036/viewer/2022062720/56813429550346895d9b17d2/html5/thumbnails/10.jpg)
Operationalization
Four questions each
– Control (alpha=0,61)
– Resource (alpha=0,79
– Decision (alpha=0,76)
– Conflict (alpha=0,88)
– Board activity=Control+Resource+Decision+Conflict
r-0,5 share etc = number of r-0.5 relationships/total number of relationships
Family coefficient= weighted sum of the r-variable, i.e., ‘blood density’ of the board
Numerous control variables: family chair, generation, board size, sales (corp size), industry, solidity, liquidity
![Page 11: BLOOD IN THE BOARD ROOM: FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD](https://reader036.vdocument.in/reader036/viewer/2022062720/56813429550346895d9b17d2/html5/thumbnails/11.jpg)
Results
Average 2 family (i.e., genetic) members and 2 non-family members
19% of boards with only family and members through marriage (35% US, 45% Italy, 72% Belgian family firms)
Average Control=17,2; Decision=16,7; Resource=15,4 and Conflict=7,6
Chairman of the board from the family=43%
r=0,5 (e.g., parent) dominating family relationship
Regression results
More family, i.e., blood, less control
r=0,125 (e.g., cousin) drives conflict emphasis
r=0,25 (e.g., grandparent) reduces board activity the most
More generations, less conflict
![Page 12: BLOOD IN THE BOARD ROOM: FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD](https://reader036.vdocument.in/reader036/viewer/2022062720/56813429550346895d9b17d2/html5/thumbnails/12.jpg)
Conclusions
Exploratory results, no generality test of hypotheses
Weak indications of genetic influence on board activity
Weak indications of nepotism in r=0.25 (e.g., grandparents) and r=0.125 (e.g., cousin), but not r=0.5 (e.g., parent) , i.e., strongest blood
r=0.5 (e.g., parent) includes both blood and socialization through living together
=> consider Blood and Socialization (interaction frequency etc)
Limitation: Gender should be considered
![Page 13: BLOOD IN THE BOARD ROOM: FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD](https://reader036.vdocument.in/reader036/viewer/2022062720/56813429550346895d9b17d2/html5/thumbnails/13.jpg)
Speculation
The Battle Ground Boardr=0,125 (e.g., cousin) relationships
conflict in the extended family with attenuated blood
The Training Camp Board r=0.25 (e.g., grandparent) relationshipsthe fifth board function, training camp
![Page 14: BLOOD IN THE BOARD ROOM: FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD](https://reader036.vdocument.in/reader036/viewer/2022062720/56813429550346895d9b17d2/html5/thumbnails/14.jpg)
Blood – what’s the point?
- r: a quantitative representation of family relationships- Generation does not represent family relationships- Blood introduces evolutionary psychology
The social construction of reality - The natural construction of reality
![Page 15: BLOOD IN THE BOARD ROOM: FAMILY RELATIONSHIPS INFLUENCING THE FUNCTIONS OF THE BOARD](https://reader036.vdocument.in/reader036/viewer/2022062720/56813429550346895d9b17d2/html5/thumbnails/15.jpg)
Competitive advantage of family firms?
Is it possible to manage nepotism?
Is it desirable to manage nepotism?