Sonja Kissling Streuli

When confronted with the decision of how to pass on ownership and management, incumbent family business owners can choose between two different justice principles: Equality and equity. While equality typically represents the justice principle that prevails in the family sphere, equity is the prevalent justice principle in the business sphere. Our paper investigates which justice principle incumbents intend to choose when passing on the business within the family, and how the related preferences alter depending family influence in ownership and management. Based on survey responses of 1’258 owner-managers, we found that ownership and management are passed on according to different justice principles. Surprisingly, an increased family influence in ownership leads to a preference for the equity principle in management and ownership succession. With our study, we contribute to the literatures of family business succession, justice and governance.

If the family business shall remain in the family incumbents must choose according to which justice principle they transfer the family business - ownership and management - to the next generation. The most prevalent justice principles in our culture in this context are equity and equality. Each choice leads to different governance structures that entail particular consequences, such as agency issues. In the following I will analyze three different succession options - succession according to equity, succession according to equality as well as a succession form that encompasses both principles - and carve out in a dynamic approach the particular challenges that arise in the family business under an agency perspective. This paper is a conceptual one that combines justice and agency considerations in the family business succession.