Boards of Directors for Small Businesses and Small Private Corporations: The Changing Role, Duties and Expectations

Abstract

Today the governance and management structure of business organizations, particularly publicly traded corporations uti lizes a board of directors. Organization use of boards of directors is considered an openly accepted and utilized structure to provide leadership and management direction in business organization. Because large public companies recognize the value to the corporation and because of the increased regulatory requirements placed on publicly traded companies, the use of boards of directors are strongly endorsed. For small businesses and privately held companies, however, a board of directors is not always viewed as a useful part of the corporate structure. This paper reports on the results of a study which focused on the board functions and operations of small privately held corporations. A survey of 180 small, of ten family owned, non‐public corporations was conducted in one Mid western state. The study corroborated the expanding body of literature suggesting the lack of formality in board functions for small privately held companies. Critical factors influencing board function and action included needs of the company, abilities of the directors, sophistication of ownership and management, as well as life cycle stage, percent of family ownership and trading status of the corporation’s stock.

Citation

Teksten, E.L., Moser, S.B. and Elbert, D.J. (2005), "Boards of Directors for Small Businesses and Small Private Corporations: The Changing Role, Duties and Expectations", Management Research News, Vol. 28 No. 7, pp. 50-68. https://doi.org/10.1108/01409170510784887