Governance and performance in the family firm: an empirical analysis on Italian listed companies

Problems of governance, associated with the Public Company, have also emerged in other types of businesses, for example in family firms. What takes place in family firms, albeit with different degrees of intensity, is an overlap, rather than the separation, of ownership and governance. In the start-up phase all the distinctive traits of entrepreneurship converge in the figure of the businessman; depending on certain affective, psychological, financial and/or professional factors, this can lead to a blurring of the distinction between the rules and needs of the family on the one hand, and those of the business on the other. In small scale family firms, the system of governance is not a significant issue because, besides not being formalized explicitly, it often represents a synthesis or in some cases a compromise between the family and business values. As the business grows, however, a process of delegation away from the family may occur, which causes a gradual erosion of the centrality of the entrepreneur, as well as of his ability to deal with internal conflicts. In the absence of an absolute leader, the relationship between corporate and family governance may degenerate into inter-familial conflicts, with knockon implications for the management of the business. In this case the Board, its composition and its characteristics are the crucial issue for corporate governance and the foundation of business success. This paper, after a brief discussion on corporate governance in its internal dimension (the Board) and framework (hard and soft law), focuses on the existing literature on the subject. It will emerge that business success is conditioned by a set of variables of the external (economic situation, market inputs, etc ...) and internal environments, that is, business management choices or what is known as 'corporate governance'.