Board functions in governance arenas: a comparative case study of four Swedish family firms

Abstract

Purpose The purpose of this paper is to explore board functions and their location in family firms. Design/methodology/approach Through structured induction in a four-case study of medium-sized Swedish family firms, the authors demonstrate that board functions can be located in other arenas than in the common board and suggest propositions that explain their distribution. Findings (1) The board is but one of several arenas where board functions are performed. (2) The functions performed by the board vary in type and emphasis. (3) The non-family directors in a family firm serve the owners, even sometimes governing them, in what the authors term “bidirectional governance”. (4) The kin strategy of the family influences their governance. (5) The utilization of a board for governance stems from the family (together with its constitution, kin strategy and governance strategy), the board composition and the business conditions of the firm. Research limitations/implications Being a case study the findings are restricted to concepts and theoretical propositions. Using structured induction, the study is not solely inductive but still contains the subjectivity of induction. Practical implications Governance agents should have an instrumental view on the board, considering it one possible governance arena among others, thereby economizing on governance. Social implications The institutional pressure toward active boards could paradoxically reduce the importance of the board in family firms. Originality/value The board of a family company differs in its emphasis of board functions and these functions are performed with varying emphases in different governance arenas. The authors propose the concept of kin strategy, which refers to the governance importance of the structure of the owner and observations on bi-directional governance, indicating that the board can govern the owners.