Family Business Governance

Agency theory refers to

• providing value to all the company's stakeholders

• the directors acting to ensure the best interest of the shareholders are being met

• corporations providing value by combining the key factors of production in a manner than markets cannot

• the directors existing to provide companies with the access to resources that they could not gain through market or management links

Which of the following problems may exist in family firms in agency theory based on behavioral dimension

I Misaligned shareholder objectives or opportunistic behavior of diversion of resources

II Establishing mechanisms that check opportunistic behavior

III Controlling family dynamics and conflicts

IV Relationships among family managers

• II and III

• III and IV

• I and IV

• All of above

Following are Chaudhry family business restaurant EXCEPT

• Taj Mahal

• Punjab

• Rajwali Restaurant

• Le Maharajah

Which of the following describe about Salman?

I Completed Diploma in Hotel Management in Manchester Business School

II Financial expert with five years of Audit and Finance experience of Pakistani banking industry

III University professor of teaching research and consultancy

IV Once said family business as Dhaba

• II and III

• III and IV

• I and IV

• All of above

For sustainable growth of family business, the new CEO Borraz presented two option which is acquire more land to grow in Muslim-populated and start a cruise-based hotel

• True

• False

What is the theory that can relates with this case EXCEPT

• Agency theory

• Stewardship theory

• Family stress theory

• Stakeholder theory

Chairman hires Mobeen Khan in the corporate board without any process for hiring a director. Why?

• Trust worth employee of Chaudhry Family

• Having a bachelor in Accounting and Finance from the University of Bordeaux

• Avoid any conflict in the meeting and refuses Mobeen’s resignation

• He is an advisory member of the family’s board

Agency cost in the family business such as

• Free riding by family members

• Entrenchment of ineffective managers

• More difficult to punish poor performance

• All of above

What is the pitfall to avoid in family business succession?

• Refusing to accept outside help

• Not establishing clear goals and objectives

• Failure to plan for transitions

• All of above

How did we define a Family business?

I Involves 2 or more members of a family that controls the majority of the ownership of the business

II The business honors/influenced by family's values

III One of the goals of the business is to provide financial support for the family

IV There is the possibility of ownership being passed down from one generation to another

• II and III

• III and IV

• I and IV

• All of above