There is potential for problems in the event of a falling-out among the family members. This can add complexity or result in costly restructuring if shareholders need to be bought out.
·The fact that people working in the business are family members does not mean that they are capable of running the business-this could lead to skills shortages.
There may also be ways in which the structure of the company could have a positive effect on governance.
·Threats to the reputation of the business could be seen as threats to family honour; this could increase the likely level of ethical behaviour.
·There are fewer short-term decisions made-the longevity of the company and the wealth already inherent in such families suggest long-term growth is a bigger issue.
·There will be fewer agency costs since most of the shareholders are also involved in the running of the business.
(c) As a small private company there are limited external requirements related to governance for this business. However, this does not mean that the company has no need to consider corporate governance:
·All organisations, whatever their size, need to operate within the law.
·All business should act with transparency, openness and integrity. Good governance is not just about reporting requirements-it is also about ensuring that the company acts responsibly and ethically towards its employees, customers and suppliers. This is important for all business.
·Depending on the size of the business, they may be required to produce audited accounts.
·The company has a fiduciary responsibility towards all the shareholders, including the fourth shareholder who does not take part in the running of the company.
·Good governance plays a part in protecting the interests of employees.
·Risk management is part of governance and needs to be carried out by all businesses.
