Governance in FOBs is both tricky and different from governance of other types of businesses. This is due mainly to the interface between the family and the business. Therefore, FOBs need both corporate governance as well as "family governance", which refers to the mechanisms governing the family\'s relationship with the business. It is evident that only the FOBs who are able to streamline the relationship between the family and the business go on beyond the 3rd generation.
Family businesses constitute the world's oldest and most dominant form of business organizations. They often enjoy many advantages over their non-family counterparts. Because of the family element, trust is likely to be more prevalent within the organization and there is often a shared understanding of the common values. Many family businesses also exhibit higher levels of commitment and loyalty to the business. However, the emotional bond that helps the family business strive, may also become the source of interference. The concern, particularly in later generations, is that the business of the family may interfere with the family business. The challenge for family businesses is how to preserve their inherent strengths, while minimizing their inherent weaknesses, and preparing for future complexities is the key.
Family governance starts from the recognition that both the business and the family have their own needs and goals, which are sometimes contradictory, and the degree to which a firm is capable of balancing the contradictory demands of family and business determines its success.