Muck-up Test Flashcards
(24 cards)
Family involvement in governance is when a family controls a firm’s governance and can alter its long-term and critical strategic decision-making.
TRUE
Family-first family firms prioritize non-family employees’ interpersonal relationships.
FALSE
The three-circle model helps to understand the dynamics of family businesses.
TRUE
The complexity of a family business can be viewed as a dynamic process of
complexity by looking at each entity’s lifecycle across time.
TRUE
The cohesiveness of family shareholders is not important for decision-making in
family and business governance.
FALSE
Education is not necessary for responsible ownership behavior in family businesses.
FALSE
The board of directors has five tasks, including control tasks, service tasks, network
tasks, communication tasks, and succession tasks all equally important for all family
business and across time.
FALSE
The composition of the board of directors does not affect the internal dynamics of the
boardroom.
FALSE
Intrapersonal conflicts occur when there are incompatibilities, inconsistencies, or
disagreements between individuals in a social context.
FALSE
There is a tendency to address conflicts among the ownership, management, and
family entities by developing governance structures (separating and demarcating
roles and creating structures).
TRUE
Family succession only deals with leadership changes related to family wealth.
FALSE
Tax issues do not affect intra-family management succession regarding timing,
ownership structure, and governance solutions.
FALSE
Succession processes for family businesses involve ownership, governance, and
management succession, which can happen simultaneously or sequentially.
TRUE
Succession has no influence on the next generation of family members’ expectations
and responsibilities, and their roles remain constant throughout their careers in the
family business.
FALSE
When a family business arrives at the third or subsequent generation by embracing
all family members, informal mechanisms are sufficient to address succession, and
there is no need for formalized corporate governance structures.
FALSE
The process of developing a succession plan in a family business is a bureaucratic
and time-consuming approach that hinders agile decision-making, which goes against
the traditional characteristics of family businesses.
FALSE
Incumbents who are financially and mentally prepared to let go are most likely to
stay actively involved in their family businesses.
FALSE
Successors’ commitment to the family business is solely driven by economic reasons,
disregarding any sense of obligation or attachment to the family or its cultural values.
FALSE
Intentions play a crucial role in determining whether potential successors will join the
family business or not.
TRUE
Verbal encouragement from parents primarily focuses on discouraging their children
from pursuing education, practical experience, and achievements in order to limit
their involvement in the family business.
FALSE
How do interpersonal relationships affect family business dynamics? What are the three approaches to defining “family”?
Impact:
Relationships (e.g., parent-child, sibling, in-law) influence decision-making, conflict resolution, and role clarity. Toxic behaviors (criticism, contempt) harm cohesion.
Three Approaches:
Structural: Based on legal/biological ties (e.g., nuclear/extended family).
Task-Oriented: Focuses on family functionality (e.g., caregiving, support).
Transactional: Emphasizes communication quality and emotional bonds.
(TM2, Slides 19-21)
What is the aim of business governance in family firms? What are the five tasks of the board of directors?
Aim:
Ensure efficient cooperation between shareholders, board, and managers to align family/business goals.
Tasks:
Control: Monitor management alignment with firm interests.
Service: Advise on strategy and family governance.
Network: Connect the firm to external stakeholders.
Communication: Ensure transparency between governance bodies.
Succession: Develop transgenerational vision.
(TM3, Slides 28-29)
Why is addressing conflicts important in family businesses? What are the consequences of unaddressed conflicts?
Importance:
Conflicts disrupt cohesion, decision-making, and business performance.
Consequences:
Reduced productivity and innovation.
Family fragmentation (e.g., sibling rivalries).
Loss of stakeholder trust and firm reputation.
Potential business failure or forced sale.
(TM4, Slides 5-8, 16-17)
How does the pruning strategy reduce family complexity?
Mechanism:
Limits ownership to committed family branches, reducing decision-making complexity.
Outcomes:
Avoids conflicts from divergent interests.
Maintains concentrated control and alignment.
Example: Excluding disinterested heirs to preserve unity.
(TM5, Slide 15; TM3, Slide 51)
