The Development of Family Companies: Management and Ownership Imperatives

This study explores management and ownership imperatives facing 427 independent unquoted (i.e., nonpublic) companies in the United Kingdom. To detect real rather than sample differences, the study used a matched pairs methodology. Chi-square and student's T-tests confirmed several similarities among the 73 family companies and the comparable 73 nonfamily companies. The tenure periods of CEOs in both groups of firms before being appointed to the CEO position were similar. CEOs in family firms had not remained in this position for significantly longer periods than CEOs in nonfamily firms, and the majority of directors in family and nonfamily firms did not hold outside directorships in other companies. Several significant differences were also detected. CEOs from the kinship group owning the family business had been in the CEO position for much longer than “outside” CEOs in family firms. Furthermore, the proportion of total shares owned by directors in family firms was significantly more than the proportion owned by directors in nonfamily firms. A significantly larger proportion of nonfamily rather than family firms had employed a nonexecutive director. In concluding, it is highlighted that a firm's identification of itself as a family firm is important in defining family firms and that firms that do not currently perceive themselves to be family firms may in the future.