Conflicts in Boards of Family Firms: A Theoretical Framework for Strategic Decision-Making

Abstract

Conflicts are social phenomena liable to occur in any organizational type; however, they're more intense (and less understood) in the family business dynamics, due to the unique psychodynamic effects of the interaction between family, management, and property. At the same time, conflicts can also be particularly salient in the ambiguous and complex context of boards (the black box of corporate governance), by the intimate connection with strategic decisions. Intersecting both areas, this study proposes a theoretical framework connecting antecedents and consequences of intragroup conflicts in the strategic decision-making process (especially in the decision quality), in the particular and favorable context of family firms board of directors. Based on deductive logic, relationships are built in view of the director' strategic counseling function, potentially raising the quality of strategic decisions by reducing the relational dimension and stimulating the organizational task-oriented discordance. Variables and constructs, suited to the specificities of the context under investigation, are proposed in direct and moderation relations under a contingency perspective.

Family Business Conflict Management

“…Various research articles indicate through a theoretical model that while board of directors in family-controlled organizations may imply management, it does not necessarily yield the minimization of conflict. The findings from the article by Karam, Filho, and Abib (2019) show that boards with high member competence-based trust levels defined by emotionally cohesive family member presence, decision-making is often marked by little relationship conflict. However, independent member presence is such boards is bound to trigger conflict.…”

Influence of Family Culture on Enterprise Risk Management in Brazilian Companies

“…This, in turn, generates negative relationships of stewardship and reduces relationship conflicts in family businesses. Karam et al (2019) also add that there is a positive effect when an external member is present on the board of directors of the family business. From this, we understand that a higher level of family power will lead to less need for formalization and standardization, consequently leading to less attention to risk management practices.…”

“…According to Bressan et al (2019), board members build a so-called 'competence-based trust,' which enables conflict resolution and affects the quality of board decision-making as well as the alignment of interests within the organization. According to Karam, Machado Filho, and Abib (2019), competence-based trust comes from knowledge that is specific to family members, which forms an influential basis capable of stimulating the sharing of information. This, in turn, generates negative relationships of stewardship and reduces relationship conflicts in family businesses.…”

Unveiling the Global Corporate Governance Landscape in Family Firms: A Comprehensive Bibliometric Analysis

“…However, family firms, with their significant global presence (Andersson et al, 2018;De Massis et al, 2018;Villalonga & Amit, 2020) face a distinctive set of challenges concerning corporate governance. Current statistics paint a stark reality, revealing that only a minority of family firms successfully transition beyond the first generation (Islas-Moreno et al, 2022;Karam et al, 2019;Ng et al2021). The absence of clear succession plans often leads to conflicts, particularly in the second generation, where siblings frequently find themselves in disagreement (Karam et al, 2019).…”

“…Current statistics paint a stark reality, revealing that only a minority of family firms successfully transition beyond the first generation (Islas-Moreno et al, 2022;Karam et al, 2019;Ng et al2021). The absence of clear succession plans often leads to conflicts, particularly in the second generation, where siblings frequently find themselves in disagreement (Karam et al, 2019). The departure of a founder or their passing triggers crises or family disputes, given the founder's typically exclusive authority within the company during their tenure.…”