Chapter 4: How does governance ‘work’?
4.6 Governing activities through values
Several participants in their definitions of, and explanations regarding, governance used different values to describe their understanding. These values included trust, commitment and
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integrity. Some participants also described governance by associating it with concepts such as ethics and ethos. This section will explore each of these examples, thus expanding the on-going discussion in this chapter, about how governance works in family businesses.
This section will explore the values that participants associated with governance. The first is trust. The example presented, was part of a much longer discussion about governance; however, part of that conversation included the participant describing his interpretation of governance. The interpretation focuses on the high amount of trust that the business builds with suppliers and people. FB6-GEN2F(I) explained:
…we tend to have very long relationships with them [suppliers] that are built on a strong element of co-operation and trust. That doesn’t mean we’re pussy cats when it comes to demanding the best price, but wherever we can, we would look to establish, and hold, long term relationships with people.
This quotation would suggest that part of FB6-GEN2F(I)’s interpretation of good governance in the business includes the creation and maintenance of long-standing relationships that have been founded on trust and co-operation. In the first part of the extract FB6-GEN2F(I) discusses these relationships in the context of suppliers. However, at the end of the extract he mentions
“people” which could be interpreted to mean people generally i.e. not just suppliers. Ward and
Aronoff (1992; 1991) find that people in communities often form a certain degree of trust with family businesses because of their reputation. This in turn leads to competitive advantage for the business because it has a loyal customer base. Thus, building trust in the supply chain, i.e. from supplier to customer (where the family business can be both supplier and customer), can be an important part of governing the family business.
Commitment to the family business was something that was not discussed directly but a particular phrase which one participant used would suggest a high degree of commitment to the
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family business. FB1-GEN3(I) was discussing how there was no formal governance in his family’s business but said: “we pretty much live and breathe the business”. Use of this idiom would suggest that the family members spend the majority of their time involved with work activities and thus show a high degree of commitment to the family business. Despite this business having no formal governance in place, FB1-GEN3(I) did have a definition that discussed values:
I would say [corporate governance is about] how we are structured, what our values are. Erm…what our goals and aspirations are and how we erm…how we structure ourselves and discipline ourselves, in order to achieve those goals…
Within this quotation it is clear that values are not the only thing he uses to describe governance; he also mentions structure, goals, aspirations and discipline. However, for the purposes of this section the focus will be on his use of the term “our values”. Use of the possessive determiner
“our” and the pluralised “values”, suggests that there is a set of values that are collectively,
rather than individually, held by the family. In contrast to this collective set of values, FB6- GEN2F(I) described governance using only one value, he said: “I suppose in essence it’s
er…it’s about running a company with integrity…that’s it”. In this context it would seem that
FB6-GEN2F(I) feels that running the business with integrity, which could be interpreted as honesty or having strong moral principles is, above all else, the most important thing. This would seem to be in line with how he described the relationships with suppliers and people being about trust.
Continuing with the theme of collective values, other participants took a similar approach to describing governance in their businesses. Examples from both father and daughter in FB2 highlight how values are linked with vision and behaviour. In a conversation about governance, FB2-GEN4(S) said:
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…we have the values and the vision which we have for the business, which also dictate the way we behave.
Her father, FB2-GEN3(I), said:
That’s the message that we have driven through, all the way through our organisation from our values of brave, harmonious and true. And with our intent to nurture it always comes down to making London beautiful.11
In the first example FB2-GEN4(S) states that the values (and the vision) that are collectively held “dictate” the way they behave. Dictate in this sense is most likely being used to mean determine, thus behaviour is determined by the values which are held. The ‘strength’ of the word dictate is also important to consider because it suggests that behaviour is controlled in a very strict rules-based manner. Similarly, her father (FB2-GEN3(I)) describes the values having been “driven through” the business implying they are present at all levels. The values he mentions of “brave, harmonious and true” seem to drive the behaviour of always “making
London beautiful”. In this sense governance in the business is about control and authority, with
values helping to drive and determine the control of behaviour.
The final two examples in this section focus on relating governance to ethics and ethos. In the first example ethics and rules are discussed together to describe corporate governance. FB2- GEN4(S) said:
[Corporate governance is] the ethics and rules by which you run your business.
11 ‘Making London beautiful’ was mentioned by the participant as the apparent raison d’être or overall
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Use of the pronoun “you” in reference to the way the business runs, could suggest that this extract describes the theory of what corporate governance is rather than the way it necessarily operates within this family business. Nevertheless, the interpretation of corporate governance, in this example, embodies the ideas of “ethics and rules”. In reality it could be quite difficult to have both ethics and rules to explain governance, because generally, ethics, although a
somewhat nebulous term, is less about a set of absolutes (with the exception of deontology, see Johnson and Cureton (2017)) and more about moral principles that guide, rather than determine, behaviour (e.g. virtue ethics, see Hursthouse and Pettigrove (2016)). The moral principles that guide behaviour are generally embodied by a set of values that an individual would uphold. On the other hand, rules gives the impression of a pre-determined, explicit set of regulations that govern conduct or procedure (Oxford-Dictionary, 2013). The important thing is to recognise that corporate governance is being described using these kinds of ideas and thus adds a further dimension to how governance is interpreted within family businesses. This connection to ethics is interesting, when reflecting on the guidance that is currently in place for both listed and non- listed companies. The non-listed guidance promotes ethical behaviour on nine separate
occasions within the principles throughout the Code (IoD, 2010). However, the FRC has only recently (2014) made an amendment to the UK Corporate Governance Code (for listed firms), to include any mention of ethics (FRC, 2014).12 Thus, when FB2-GEN4(S) discusses ethics as part of a definition of corporate governance, it seems like a timely consideration.
In the second example, FB4-GEN4(I) appears to connect ethos to corporate governance:
12The latest iteration (2014) of the UK Corporate Governance Code suggests that “One of the key roles for the board
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I would understand [corporate governance] to be the, I suppose the, way in which we as a company organise ourselves and the way that our activities are governed by our own ethos, and our own organisational structure.
Use of the possessive determiner “our” in relation to ethos suggests a focus on the internal spirit or culture of the family business to inform governance practice. This is compared to the previous example where the notions of ethics and rules are discussed. In the case of ethics, the moral principles that guide behaviour are, by their very nature, not possessive, and thus not internally generated. The differing focus (i.e. internal vs. external) in the way governance is understood and how this informs the behaviour of individuals, is interesting because it provides an alternative insight into how governance works.
This section has highlighted participants’ use of values such as trust, commitment and integrity to describe governance in family businesses. In addition, it has explored use of the generic terms values, ethics and ethos in describing how behaviour should be guided. Previous themes and sub-themes have highlighted how governance has control over the business, is understood and practised as financial and stakeholder control. The findings related to values offer a further practice of ‘control’ through ‘dictating’/regulating behaviour. The next section will summarise the meta-themes that have emerged from the analysis of data in this chapter.