A Debate on Corporate Governance of Family Firms and Business Groups

This article reviews corporate governance literature of family firms and business groups which is relevant to Korean conglomerates. We summarize major issues on corporate governance for Korean conglomerates and classify studies according to those issues: existence of controlling shareholder, deviation from the one share-one vote principle, family members' participation in management, succession of control to family members, and the relationship between financial and industrial capital within business groups. Existing literature shows that firms with controlling shareholders are common globally. While many factors related to corporate governance impact firm value, they create both positive and negative ramifications in a nuanced manner. Also, corporate governance endogenously emerges under different circumstances-law, degree of market development, or management-union relations across countries. Thus, there is no strict standard corporate governance system that can apply to all family business groups in different countries. Proper frameworks for policy makers and managers will arise only in the particular contexts in which family business groups operate.