Evaluate the role of family ownership in corporate governance failure

Corporate governance failure is an existential business risk. Recent decades have witnessed a number of high-profile corporate failures worldwide, such examples include Enron, Worldcom, Royal Bank of Scotland, Satyam. Causes of corporate governance failure are varied, yet the consequences have a far-reaching impact. In this assessment, you should reflect on the relationship between the aspects of corporate governance we have considered in this course, and their role in corporate governance failure. You are required to discuss and evaluate ALL of the following topics relating to corporate governance failure. In your answer you should make reference to academic journal articles and relevant case studies.

Question 1
A large proportion of privately held companies have family involvement, in terms of both ownership and management. Some literature finds that family ownership helps to enhance monitoring mechanisms and consequently improves firm performance. Family firms are not motivated to pursue short-term objectives and tend to prioritize succession planning, thus implying that there is a positive relationship between family ownership and business ethical awareness (Arregle et al. 2007). However, despite the benefits of family ownership, problems may still exist. Family firms are characterized by trust among family members, and such trust can always be exploited by dishonest family members. Furthermore, trust may enable family firms to have less strict controls in place. In addition, as firms grow, there may be a need to bring in outside investors, this may result in conflicts of interest between family members and non-family shareholders. Similarly, conflicts may also arise between family members, for example, as a result of generational differences. Factors such as these, may contribute towards corporate governance failure (Sacristan-Navarro & Cabeza-Garcia, 2020)

Required: Evaluate the role of family ownership in corporate governance failure, you should make reference to Sacristan-Navarro & Cabeza-Garcia (2020) and the case of El Corte Ingles.