Owned business n non executive


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Owned business n non executive

  1. 1. “Discuss about the advantages and disadvantages of family-owned business and as for the second part: the role of non-executive directors” Governing Business Activity (FE1023) Prepared for: Mr. Behrooz Prepared by: U1153049 School of Business and Management (SOBM) Linton University College 7 December 2011
  2. 2. U1153049 FE1023 2011/12 AbstractThis report is a discussion on the advantages and disadvantages of family business. For thesecond part is to discuss the role of non-executive directors in the company.The main discussion is to state the definition of family business and the advantages anddisadvantages of family business. Then define the non-executive directors including theappointment and role of the board of the company.It can be concluded that the family business also generates income economy. In addition to thefamily business also has a unique compared to other business. While the topic is the role ofnon-executive directors is to know what to do for a contribution to the board of directors andthe company.U1153049 FE1023 Page 2
  3. 3. U1153049 FE1023 2011/12 CONTENTS PAGESection……………………………………………………………………..Page NumberChapter 1: The Family Owned Business………………………………………….4 1.1: Introduction 1.2: Advantages and disadvantages of family owned business 1.3: ConclusionChapter 2: The Role of Non-Executive Directors………………………………..7 2.1: Introduction 2.2: Definition of Non-Executive Directors 2.2.1: Appointment of Non-Executive Directors 2.2.2: Executive and non-executive directors 2.3: The Role of Non-Executive Directors 2.4: ConclusionAPPENDICES………………………………………………………………….10REFERENCES…………………………………………………………………12U1153049 FE1023 Page 3
  4. 4. U1153049 FE1023 2011/12 Chapter 1: The family business1.1: IntroductionIn general, family businesses can be said to be unique compared to other business as there aredifferences resolved problems encountered in the entry. This is because there is mixingbetween the business and family business management matters. In addition, family businessescan be found in various economic sectors to the business world to manage the disunity betweenbusiness known as mom and pop.According to Meredith (1988) define family business as a business that has a majority positionheld by members of the family, and usually the founder and partner holds a majority equitybusiness and his children and his kin in key positions in the companys management level.1.2: Advantages and disadvantages of family owned business1.2.1: Advantages of Family owned business The family business is unique in that creates a sense of belonging, such as commitment,knowledge, flexibility of time, work and money, thinking ahead, a culture that is stable, fastdecision making, dignity and reliability. Also, be prepared to sacrifice the trouble and do nottake profits. Having a long-term perspective and less bureaucratic and more flexible. In terms of financial resources is easy to make these loans because all family membersare a major source of business financing and has a track record. In terms of human resources, membership in a family with an interest and commitmentto doing business can be equally involved. The spirit of this family indirectly facilitates theobtaining of a committed workforce in the family.U1153049 FE1023 Page 4
  5. 5. U1153049 FE1023 2011/12 For the source is a family business has its own power source so as to create a personalnature of intimate relationships with their customers. This is because the family culture into thecompany culture. Apart from that entrepreneurs have the freedom, independence and full control of thebusiness. Free to act alone if the advantage of such action thinking the company is profitable.Thus can improve family relationships through the sharing and communication in the familybusiness closer relations among family members.1.2.2: Disadvantages of family owned businessThe family business also has disadvantages in terms of skills and equipment. If there are heirsof a new family in dire need of reform that have been left out skills. Usually owned by theirskills obsolete and outdated and not compatible with the current era. Also, had to deal with thetransition, this is the problems that befell the family business. This is because the founderswanted to maintain the old traditions and new substitutes the need to make changes. Thus theconflict in the family that ran the business. Family businesses face limited choices in securing sources of external capital resources,particularly capital. This usually occurs when the long-term need additional capital to financelarge projects such as opening new branches. Next was the financial stress occurs when thereare family members taking advantage of a companys financial. Then have poor reward systemwould cause injustice or commensurate with the work done. Replacement of management that can be divisive relationships within the family. If noappropriate leadership and the uncertainty in determining that is really qualified to take overthe business would cause a conflict of roles. In terms of personality conflicts and problems will cause emotional issues that interferewith the effectiveness and management of family businesses. May also be an argument ordisagreement with the original management system and existing employees .If the business isneglected, family members had invested more than the purchase price of the company to ensurethe success of the company. In terms of leadership are a number of brothers and sisters have equal shares in thecompany so no one is allowed to have a more dominant power. If there is a trend in theU1153049 FE1023 Page 5
  6. 6. U1153049 FE1023 2011/12distribution of power unwillingness to allow a person responsible for the development of thecompany. Next is a weakness that tends to favour the family values a manager though not efficientor potentially will make it difficult to attract professional management. Because the structure isunclear and confusing and unclear division of work. 1.3: Conclusion In conclusion, the family business is like other businesses set a goal to maximizeprofitability and achieve real success. The difference between a family owned businesses withother businesses is in terms of business ownership and management held by a family at a timeand passed from one generation to another generation.U1153049 FE1023 Page 6
  7. 7. U1153049 FE1023 2011/12 Chapter 2: The non-executive director 2.1: Introduction In Malaysia, economic growth depends on a whole to the private sector for sustainablegrowth in trade and business activities and operations of the privatization of postal services,telecommunications, power generation and national sewerage company reports and accountsreveal the profound research. Because the business environment and laws continue to become more complex and itset a more reasonable claim among the directors of the company. It is important that there is alevel of efficiency behaviour of corporate, behaviour with a high degree of professionalism andreliability to support good corporate integrity. There is a principle of the directors is related to transparency, integrity, accountabilityand corporate social responsibility. The aim is to raise standards of corporate governance and corporate behaviour bysetting standards of ethical conduct for directors based on the beliefs and values that can bereceived, held or supported by someone. To uphold the spirit of social responsibility andaccountability in line with legislation, regulations and guidelines governing a company. 2.2: Definition of Non-Executive Directors According to Section 4 of the Companies Act defines a director as an executive officerof the company at the time of any such name, whether he was a director. Companies Act alsostates that directors, including whether the person who occupies the position of corporatedirector by whatever name called and any person any directions or orders are commondirectors of the corporation to act and an alternate or change in directors. The Company was required to have at least two Directors and there is no statutory limiton the maximum number but I was determined by the Articles of the Company. Typically amaximum number of Directors in the Articles of the Company is 50. Companies Act 1965 describes only two qualifications required to enable someone be aDirector of the Company it must be a man and must be of full age and ability.U1153049 FE1023 Page 7
  8. 8. U1153049 FE1023 2011/12 2.2.1: Appointment of Non-Executive Directors Power of Appointment is a method that tied in M & A Company. The law does notlimit the manner or the prohibition of what is written in the M & A with the director to appointsomeone. At this appointment power usually found in the general meeting of Shareholders.However, a provision may be made to enable the Board of Directors appoint an outsider orlegally. There are three ways appointment is through M & A. Once incorporated, and includedthe names of Directors in the Companys Articles or Memorandum. The second is through theappointment of the Board of Directors and the third resolution is made by the Shareholders ofthe Board with an invitation from the Board of Directors.2.2.2: Executive and Non Executive Directors: An executive director is usually appointed from among the directors and salariedposition with the company. Some companies hire executive from the top management group asa director, in addition to assuming the position of executive director. Non-executive directorsare usually not involved with the daily business of the company, but are responsible, togetherwith other directors to formulate and implement policies. Non-executive directors have theright and the same liability as other directors despite not being paid and are not involved in thedaily affairs of the company.2.3: The Role of Non-Executive DirectorsNon-executive directors play a role in the assessment and have the nature to know. They alsoshould ask questions by intelligent, constructive debate, challenging the hard and dispassionatedecisions. And they should listen sensitively the opinions of others, both inside and outside theboard. • Non-executive directors should have a clear understanding of goals and objectives, capabilities and capacity of the company.U1153049 FE1023 Page 8
  9. 9. U1153049 FE1023 2011/12 • In addition, a non-executive directors need to devote time and effort to attend meetings and to know what is required of the board and each of its directors, and to discharge those functions. Also need to ensure at all times that the company is properly managed and controlled effectively. • Implement the various functions and responsibilities as stipulated in the guidelines and the instructions issued by the authority regulatory from time to time. And advised of the companys compliance with relevant laws and contractual requirements. • A non-executive director should have insisted that what informed of all matters that are important to effective corporate management. • Should limit his directorship of a major company in order to devote time and effectiveness of each director to be his own judge of his abilities and how best to manage time effectively in the company as a director. • In addition, non-executive directors also need access to such advice and a service of the company secretary is responsible to the board to ensure that the procedures, rules and regulations are complied with. • A non-executive director should perform his duties at all times for the benefit and success of the company. And to disclose forthwith all contractual interests, either directly or indirectly with the company. 2.4: Conclusion In conclusion, non-executive directors also have a role in the company and have the power in the business management. Also contribute to the board of the company to ensure that all decisions or activities are on time and ensure efficient use of natural resources, and improve the quality of life by promoting of corporate social responsibility Words: 1590U1153049 FE1023 Page 9
  10. 10. U1153049 FE1023 2011/12 Appendices 1: picture of family owned businessU1153049 FE1023 Page 10
  11. 11. U1153049 FE1023 2011/12Appendices 2: Picture of non-executive directorsU1153049 FE1023 Page 11
  12. 12. U1153049 FE1023 2011/12 REFERENCES: Webpage: Kod Etika Pengarah Syarikat (2008) Available at:http://www.ssm.com.my/perkhidmatan_kod.php (Accessed date : 28 November 2011) Family Business -From Wikipedia, free encyclopedia (2011) Available at:http://en.wikipedia.org/wiki/Family_business ( Accessed : 29 November 2011) Advantages of family businesses. Available at:http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1073792650&type=RESOURCES (Accessed: 2 December 2011) Bab 9 Perniagaan keluarga (2008) Available at : http://www.scribd.com/doc/4381196/BAB-9-P1-KELUARGA ( Accessed: 2 December 2011)U1153049 FE1023 Page 12