Complete the fill-in-the-blank questions below to test your knowledge of the material in chapter 5 of the textbook.
1
A key influence on the type of ownership and control structure is the legal system. Traditionally law systems do not give as much protection of minority shareholder's rights as do common law systems.
Page reference: 64
2
A family firm's governance structure may include a family .
Whilst a family meeting or assembly may be adequate when the business is small or the number of family members is limited, as it grows or as the number of family members increases the establishment of a family council may be helpful.
Page reference: 66
3
An area of potential difficulty for smaller companies when seeking to establish a sound system of corporate governance is the appointment of non-executive directors.
The difficulties may relate to either recruitment (i.e. finding suitable non-executive directors who wish to serve on the board of a smaller company) or to issues of remuneration (i.e. finding the funds to remunerate the non-executive directors an appropriate amount).
Page reference: 68
4
In family owned firms there may be a lack of planning with detrimental results to the future of the business when, for example, the founder retires.
If a suitable person is not ready to take over the running of the company, and accepted by the rest of the board as an appropriate appointment, then various problems can occur including a lack of cohesive direction and internal disagreements.
5
Smaller companies may often the roles of Chair and CEO.
This may occur as the firm does not have a sufficient number of directors to separate the roles, or it may occur because there is a dominant individual who wishes to retain all the power by combining the two roles.
