Families, it turns out, are sometimes more reluctant than states to reform boards and professionalize their company's board membership. In a recent McKinsey Quarterly article, "Improving Board Performance in Emerging Markets" (2006 Number 1), the authors argue that effective corporate boards are even more a priority for emerging market companies than they are everywhere else, given the relative weakness of local regulatory and legal systems.
Concentrated ownership on boards, whether by a family or by a state, is one sure way to undermine good governance. According to the McKinsey Quarterly article, family businesses have been slower to reform than some states. The article notes, however, that change is happening as second and third generation owners -- increasingly schooled in global business best practices-- take over management of businesses from their elders and open their boards to professional directors, independent market information, and other necessary elements of sound corporate governance.
As for state reforms in this area, there is the successful example of Singapore's government-owned Temasek holdings company. China and Malaysia are two other countries that have launched highly visible initiatives to improve state company board performance.
