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Abstract
Using a sample of 714 private family influenced businesses in Germany, we investigate the relationship of goal alignment between owners and managers and the existence of a board of directors. Agency theory and stewardship theory serve as theoretical bases for our study. We find that firms with relatively high levels of goal alignment are less likely to have a board of directors. Our results provide support for the substitution hypothesis of formal by social control mechanisms. Furthermore, the findings show that firms without a board and with relatively low levels of goal alignment have less family members in the top management team. This circumstance might in turn be a trigger for owners to install a board.
* The authors are grateful to Joe Astrachan, Sanjay Goel, Niki Kux‐Kardos, Bill Schulze, Alex Stewart, the special issue editors, and three anonymous reviewers for their valuable comments and suggestions on earlier versions of this paper. The study benefited from the financial support of the German EQUA and Friedrich Naumann Foundations, which are both gratefully acknowledged.
* The authors are grateful to Joe Astrachan, Sanjay Goel, Niki Kux‐Kardos, Bill Schulze, Alex Stewart, the special issue editors, and three anonymous reviewers for their valuable comments and suggestions on earlier versions of this paper. The study benefited from the financial support of the German EQUA and Friedrich Naumann Foundations, which are both gratefully acknowledged.
Notes
* The authors are grateful to Joe Astrachan, Sanjay Goel, Niki Kux‐Kardos, Bill Schulze, Alex Stewart, the special issue editors, and three anonymous reviewers for their valuable comments and suggestions on earlier versions of this paper. The study benefited from the financial support of the German EQUA and Friedrich Naumann Foundations, which are both gratefully acknowledged.
1 In German law, a 25-percent ownership stake is required for blocking relevant decisions; therefore, we chose the 25-percent hurdle.
2 The concept of organizational culture is close to our understanding of goal alignment. For instance, O'Reilly and Chatman (Citation1996, p. 160) define organizational culture as “a system of shared values (that define what is important) and norms that define appropriate attitudes and behaviors for organizational members (how to feel and behave).”
3 For reasons of readability, these companies will be named “corporations” throughout the remainder of this paper.
Additional information
Notes on contributors
Torsten M. Pieper
Torsten M. Pieper is research fellow at the Cox Family Enterprise Center and adjunct professor in the Management and Entrepreneurship Department at Coles College of Business at Kennesaw State University.
Sabine B. Klein
Sabine B. Klein is Chair for Strategy and Family Business and academic director of the European Family Business Center at European Business School (EBS) in Oestrich-Winkel, Germany.
Peter Jaskiewicz
Peter Jaskiewicz is assistant professor in the Department of Strategic Management and Organization in the School of Business at the University of Alberta in Canada.