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The Importance of Fairness in Family Business Structure

Added on -2019-09-20

This article discusses the importance of fairness in family business structure and how it can impact your company. It highlights the need for equal ownership distribution, fair representation on the board, and unbiased evaluation of family members for management succession. The article draws on successful cases of Asian family businesses and provides insights and strategies for designing a fair family business structure.
| 2 pages
| 617 words

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Please describe how family businesses may affect your company. (2 pages)During this class, I have learned several useful concepts which allowing us tobetter organize a family business structure in the future. We have saw that several shortcomings of Chinese family business. However, in the class, we also saw several successful cases of Asia family business. Among these successful cases, I saw one crucial common factor, fairness.In the last assignment, we were actually trying to set up a business structural which took into considered both ownership succession plan and management structure for a family business. Forownership structure, I think in the ownership should be equally divided to thenext generation, which includes female as well. Equally divide the shares to the children will generate a sense of fairness among the family, resulting a harmony family. Besides, considering the shares among each family memberwill eventually be different, I think only the family member who work in the family business can elect and be elected to the business board member as family representative. This is also considering to be fair to all the family member. The one who join the business board should not be the one who has the most shares among the company, but the person who is most familiar with the company, so to make better decision for the company. Also,in the board, we should maintain 30-40% of independent board member, to give professional suggestions to the company. The independent board member should be acquired by 50% of votes from the shareholders, preventing people from controlling the board. Also, in any case that a family member want to sell their shares, they can only offer to sell to other family members. For such mechanism, it provides a protection for the family business from being taken from outsiders.For the management succession of the family business, we suggest that all family members should be evaluated by their will and capability. The most important issue is a person’s goal and passion, since that will motivate a person to keep improving. Therefore, we should put the family member to the department which they are interested in. For example, if a family member is passionate about marketing, we should arrange him to start from entry level of marketing department, and evaluating their performance and capability. Then, we should track each family member’s performance, evaluating their ability and attitude, so to decide which family member are qualified to promote to a higher level of the management team. Also, in the management succession plan, we think the family member should be compared with normal employees in the company. In other words, family members should be evaluated with outsiders. This measure will be a strong incentive

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