Corporate governance in Maltese private family businesses : a study

Abstract

PURPOSE: The primary aim of this study was to analyse the significance of family involvement in Maltese private family companies (PFCs) in terms of its implications for the corporate governance of their businesses. This was done by assessing the major cultural, regulatory and structural characteristics of Maltese PFCs, the advantages and disadvantages of family influence to their corporate governance, and other implications for corporate governance. DESIGN: For the principal objectives of the study to be reached, data collection was designed around a qualitative mixed-method approach, whereby semistructured interviews were conducted with 9 participants, composed of professional consultants experienced in the field. FINDINGS: The findings reveal that a high level of family influence in local PFCs subsists, transpiring into areas of both confidence and concern. Shortcomings in gender diversity persist in succession planning and the delegation of executive responsibilities. Structural arrangements in PFCs often mirror familial hierarchies, while cultures can be quite conservative and wary of evolutionary change. While family involvement may yield a number of adverse connotations, such as conflicts of interest and nepotism, enhanced stakeholder relationships, lower employee turnovers and higher dedication spurred on by family goals are also by-products of such involvement. Approach to the implementation of corporate governance structures is reactive rather than proactive, even if such developments can only generate success in a PFC’s endeavours and prospects. Consequently, there is still room for improvement in PFCs’ efforts in this regard. CONCLUSIONS: This study concludes that an underlying local deficiency in the promotion of principles for good corporate governance tailored to family businesses, coupled with additional complexities arising from inherent characteristics of PFCs, could be a recipe for calamity in their journey towards the formulisation of solid corporate governance processes. IMPLICATIONS: This study raises awareness on the need of improving corporate governance practices and approaches in Maltese PFCs. It is hoped that the recommendations presented hearten PFCs to direct their attention towards the prioritisation of formal governance processes, while motivating competent authorities to provide more support in this respect.