PRACTICING CORPORATE GOVERNANCE TOOL FOR FAMILY BUSINESS SUSTAINABILITY

Abstract

The purpose of this paper is to analyze the importance of practicing the good governance tool for the sustainability of a family business. A family business with its three dimensions which is family, business, and ownership often face some conflicts and misunderstanding in the management of the family businesses, because it must accommodate three different interests. Therefore to avoid and preserve the family business, it is suggested to practice the good governance tool. Two family businesses were chosen as participants in this research. The two companies already involved the second generation in its operation. Also, one expert who is a family business consultant with more than ten years of experience involved as an informant. After having the literature review and conducting an in-depth interview, found that from the three good governance tools only one regularly practicing by the participant's company which is a family meeting. The other two tools (family constitution and family council) are implemented partially and un-systemized. Nevertheless, the two companies agreed on the urgency to apply the two tools in purpose to achieve the sustainability of their family business. In line with that, the family business consultant shares his experience in facilitating family businesses to scale up (for example when prepared themselves listing in stock exchange), all of the companies were practicing the three good governance tools. Therefore, this paper suggests for every family business that has the intention to run the business for the long term should be practicing the good governance tool which is a family constitution, family meeting, family council.