Research on the succession dynamics of family enterprises has attracted increasing attention from scholars in recent years (Ahmad, Najam & Mustamil 2025; Owusu-Acheampong et al. 2024) because of their role in driving economic growth (Porfírio, Felício & Carrilho 2020). Succession in a family business is the process of transferring management and ownership to the next generation (Kidwell et al. 2013). Scholarly research has examined whether successive generations in family enterprises share similar attitudes, adhere to established business cultures, and uphold inherited social norms (Ferrari 2021). These attitudes, if aligned with the family business intent, could contribute to successful succession. On the other hand, previous studies have outlined the primary factors contributing to failed succession in family firms (Binz Astrachan et al. 2021; Ferrari 2023; Sathe, Enrione & Finley 2022). While many factors are listed, challenges in identifying capable and willing family members to assume leadership roles are often compounded by the owners’ reluctance to relinquish control (Mokhber et al. 2017). These challenges raise the question about the governance mechanisms in family businesses.

In more recent studies, scholars emphasise the pivotal role of governance mechanisms in regulating affairs in family businesses to mitigate conflicts and facilitate amicable ownership transitions (Binz Astrachan et al. 2021). The definition of governance is ‘the system by which firms are regulated and monitored. This includes the relationships between owners, the board of directors, and the decision-making process’ (Roth, Tissot & Gonçalves 2017:98). Encouragement for the introduction and embracing of governance mechanisms in family businesses emerges as a frequent theme, with their potential to alleviate succession-related conflicts and foster a shared vision among family members before the actual succession event (Parada et al. 2020; Umans et al. 2020).

While governance is important, Teixeira and Carvalho (2024) state that family businesses were unlikely to have the governance mechanisms in their succession plans. Existing literature has documented governance mechanisms, including family meetings, structures, agreements, and protocols (Matias & Franco 2021). Although these formal protocols are well-known (Arteaga & Escribá-Esteve 2021; Jayantilal, Jorge & Alcarva 2024), their functioning in family business succession remains underexplored (San Martin Reyna et al. 2025; Thakur & Sinha 2024). Given that the types of governance mechanisms are known, our primary objective is to investigate how these mechanisms function during leadership transitions. Our curiosity aligns with the call for research on the role of specific governance structures and their relationship to the performance of family businesses, particularly those operating in uncertain environments in emerging markets (San Martin Reyna et al. 2025). Because organisational performance is a broad concept, we have simplified our underexplored research question to: What role do governance mechanisms play in family business succession planning (Thakur & Sinha 2024)? Understanding the role of governance mechanisms in succession planning is vital, as these frameworks aim to build mutual consent, manage expectations, and foster a collective vision that supports a successful leadership transition (Umans et al. 2020).

Our secondary objective, which is contextual, is to investigate how governance mechanisms function in the succession planning of family businesses in a developing country context (Owusu-Acheampong et al. 2024). As San Martin Reyna et al. (2025) explain, it is essential to explore family business in developing countries characterised by uncertainty. Furthermore, these under-theorised contexts offer valuable insights given their social norms (Orole, McKenna & Härtel 2025). Our focus on such a context is South Africa, whereby social norms and values such as spiritual beliefs, ethical principles, and cultural traditions, including Ubuntu (humaneness), could enhance our understanding of organisational governance (Kupangwa, Farrington & Venter 2025). Values of humaneness, which anchor governance mechanisms, have the potential to minimise agency costs. However, power struggles, particularly those experienced by women in South African family businesses (Kinnear & Ortlepp 2016; Urban & Nonkwelo 2022) may increase agency costs during succession planning.

Our study is anchored in agency theory, which examines how principals and agents interact to minimise agency costs (Eisenhardt 1989; Jensen & Meckling 1976). In the context of family businesses, the founder is the principal, while immediate and extended family members are agents (Kidwell et al. 2024). Our study departs from the usual application of agency theory, which typically adopts a bleak perspective on conflict and associated costs, by demonstrating governance mechanisms that enable successful succession planning (Kidwell et al. 2024). Furthermore, we argue that social norms shape the success of governance mechanisms in agency theory. These social norms have the potential to redistribute agency costs, thus leading to positive outcomes. Our contribution to agency theory is to show how context-specific social norms, such as humaneness, can serve as antecedents of successful governance mechanisms for succession planning.

We interviewed managers from 12 family businesses that have succession plans and governance mechanisms in place. Our focus was on the South African context, where active family businesses often lack succession plans (PwC 2023). Surprisingly, studies on governance in South Africa have focused quantitatively on listed companies (Dos Santos, Viviers & Venter 2024; Urban & Nonkwelo 2022). However, such a deductive approach does not fully capture the contextual nuances involved in family businesses. Through our exploratory approach, the study made several contributions to family business research and agency theory.

Firstly, the study demonstrates that humaneness is a key governance philosophy that can guide succession planning in the absence of formal contractual agreements. Humaneness, demonstrated through treating one another with integrity, trust, and respect, becomes a noteworthy aspect of functioning and reinforcing agency. Secondly, our study showed that, while family business accounts for principal−agent interactions, agency theory should also be expanded to emphasise agent−agent (which later develop into principal−principal) interactions, which are instrumental in succession planning. These agents are the family members designated for succession. Thirdly, the study showed that the agency theory contains implicit assumptions about power, which are offset by existing contractual agreements. Lastly, the study showed that a constellation of governance mechanisms (humaneness, minimising power dynamics, and agent−agent interactions) builds consensus decision-making, which is required for succession planning. These findings not only advance family business research but also enhance the application of agency theory in different contexts.

The study provides practical insights for family business owners and practitioners to guide succession planning. Succession in family enterprises is, at its core, an act of entrepreneurial renewal. Each transition requires re-envisioning the business’s purpose, adapting to changing markets, and empowering a new generation to act on opportunity. In this way, governance mechanisms do more than preserve control; they sustain the entrepreneurial momentum that originally gave rise to the enterprise. This perspective highlights succession planning as both a governance imperative and a vehicle for long-term entrepreneurship in South Africa’s evolving economy.

Our research employed an interpretivist approach, as reflected in the researcher’s emphasis on analysing real-world events or scenarios in their contextual circumstances and background (Pervin & Mokhtar 2022). We used an interpretivist philosophy to enable participants to construct their own experiences of governance and succession planning in family businesses (Bham 2024; Saunders & Lewis 2018). The target population from which the sample was drawn comprised family businesses in Gauteng, specifically those located in Johannesburg, South Africa. Johannesburg is one of South Africa’s economic hubs, and home to reputable family businesses. We limited the study to Johannesburg to obtain insights into the phenomenon under study, rather than intending to generalise the findings, which can be addressed in future research. While quantitative studies in this context have focused on businesses listed on the Johannesburg Stock Exchange (Urban & Nonkwelo 2022), the focus of this study was on unlisted companies. The focus on unlisted companies was chosen to enhance our understanding of how these businesses, sometimes facing resource constraints and uncertainty, navigate complex succession and governance mechanisms. We planned to access the participants through business associations.

However, the authors lacked access to the target population because of regulations governing the protection of personal information. Therefore, the researchers relied on personal networks, business groups, and forums to recruit participants. Our initial contacts referred some of the participants. Purposive sampling was used to select the participants, based on predetermined criteria (Taylor, Bogden & DeVault 2016). Firstly, the participants were selected based on their managerial engagement in family businesses that had been in existence for longer than 10 years (see Table 1). Secondly, the selected businesses had some form of business governance and succession planning in place. Thirdly, participants needed to have had real-life experience with succession planning. After screening potential participants from local business organisations, 12 family businesses with existing succession plans were identified for selection as the final sample. Considering that the study focused specifically on companies with existing succession plans, the sampling frame for the final sample was limited, as only a few qualifying companies exist in the chosen geographic area. However, the sample was deemed adequate, although limited in its capacity to make generalisations (Saunders & Lewis 2018). The companies were represented by individuals engaged in management. Table 1 presents the list of participants who met the study’s inclusion criteria.

The participants who were included in the final sample operated in three primary industries: retail, manufacturing, and services. Although the study did not focus on racial dynamics, the sample was diversified with Indian, African, and white participants. The sample comprised individuals who owned the business and those who held leadership positions. The individuals’ participation in management activities enabled them to discuss governance and succession-planning matters. According to these participants, their businesses were at distinct stages of the succession-planning process. The commonality across these cases was that succession planning discussions had already begun, while the implementation levels varied. Some companies had family members appointed to ownership roles, whereas in others, participants had not yet assumed the executive leadership roles.

This section presents the three themes that demonstrate the role governance mechanisms play in succession planning.

The primary research question examined the role of governance mechanisms in the succession planning process of family businesses in South Africa. The study makes several contributions to family business research and expands the application of the agency theory. Figure 1, grounded in agency theory, shows that humaneness is a core philosophy that drives governance mechanisms in the agency field, specifically the family business environment. The emergence of governance mechanisms shapes consensus in decision-making, ultimately influencing the succession process.

The first contribution addresses the antecedent that explains how the agency theory operates in a given context. The contribution is that humaneness, as a core philosophy of the governance mechanisms, guides succession planning, especially when formal structures are weak or absent. Our findings demonstrate that humaneness, as expressed through integrity, trust, respect, transparency, and accountability, plays a significant role in complementing formal governance mechanisms, such as contracts and written agreements. This humaneness, known as Ubuntu, is the essence of social interaction in sub-Saharan Africa (Karsten & Illa 2005). Embracing humaneness as a core governance value enables the family to navigate the complexities of succession with clarity and mutual respect, ultimately supporting the sustainability of the family business across generations (Gilding, Gregory & Cosson 2015).

In addition to humaneness, the findings showed the contentious role of religious beliefs in governance. Religion was found to empower succession when practised by family members, but when external religious leaders are involved, the impact is not significant, in fact opposite. Our findings help to explain why, in some cases, religion supports succession planning and, in others, has unintended consequences (Abaddi 2025). These findings add to the governance literature the need to focus on contextual, culture-specific practices, such as religion, that function as institutions when existing family ones are weak.

Building on the agency theory, the second contribution expands the classification of agency relationships. In family business research, the agency theory has been used to explain the principal−agent, principal−principal, and behavioural aspects of the principal (Chrisman et al. 2024). Our study examined how governance structures enable principals and agents to navigate succession planning and the study showed that governance structures facilitated the clarification and assignment of roles to the different family members (Parada et al. 2020; Thakur & Sinha 2024). Furthermore, the involvement of the non-executive members was seen to act as a potential buffer, ensuring a smooth transition. Contrary to the view that the traditional board of directors may not be of assistance in the business performance, as they hold their positions to meet a legal obligation (Blanco-Mazagatos et al. 2016), the findings demonstrated that they played a role in helping the business make key decisions.

Our study further identified that when the appropriate governance mechanisms are in place, they can direct agent-to-agent interactions during the succession process. The agent−agent interactions involve family members being prepared for succession planning by the principal. The agent−agent interactions determine whether the succession process will succeed, before family members become the principals, with shareholding. Participants observed that although many family businesses have successful succession models and remain competitive, they often fail because of internal conflicts and subjective decision-making, driven by individuals’ personal interests, rather than objective business logic (Binz Astrachan et al. 2021; Ferrari 2023; Sathe et al. 2022). While the existing literature focused mainly on the engagement between the founder and the successor, there was a noteworthy need to explore how the governance mechanisms in place guide the agent−agent engagement, because family rivalry has been shown to impede succession planning (Mahomed & Mtembu 2021). These agent−agent relationships will transition to principal−principal interactions, once family members assume ownership through succession. Such a transition warrants exploration in future studies.

This study’s third contribution is that strong governance mechanisms mitigate power struggles during succession planning. This finding is instrumental, especially in agency theory, which has been driven by informal asymmetries, but implicitly assumes power dynamics (Saam 2007). As argued in Saam (2007), the principal always has power over the agent. Even in a family business, a founder who is the principal can reward good agents with succession, while withholding it from those who do not pass the succession test. Furthermore, the power is evident in the principal’s ability to influence the successor’s behaviour. Display of such power was seen when Participant 2 said: ‘… I make those decisions, whether anybody accepts it or not’.

Our findings showed that while power dynamics exist in the principal−agent relationship and agent−agent interactions, these are minimised by the appropriate governance mechanisms, such as formalised written agreements. The use of meetings (Binz Astrachan et al. 2021) and written shareholder agreements has been listed in numerous literatures as a key governance mechanism in family businesses (Binz Astrachan et al. 2021; Matias & Franco 2021; Parada et al. 2020; Umans et al. 2020) but power dynamics can limit the efficacy of meetings that do not lead to written agreements. Power dynamics can lead to different coalitional constellations between and among family members (Ben-Shahar et al. 2023), thereby affecting the succession process. Therefore, future research is needed to examine the interplay between governance, power dynamics, and succession in family businesses.

The final contribution is that the constellation of governance mechanisms enables consensus-based decision-making during succession planning. Singh (2025) argues that the primary role of the agency theory is to convert conflicts into consensus. Our results expand the findings by stating that while acknowledging agent−agent interactions, humaneness, and balancing power dynamics will enable consensus in decision-making for succession planning.

These findings are essential, as they demonstrate the mediating role of consensus-building in the discussions about family business succession process (Bham 2024). Future research could examine how consensus-building occurs in family businesses. These contributions provide theoretical and practical explanations of the agency’s role in family businesses.

This study examined the role of governance mechanisms in succession planning in family businesses in South Africa. By grounding the phenomenon in the agency theory, the study demonstrated how the unique setting of family business research can empirically extend the theory’s applicability and assumptions. We have shown that the contextual setting, especially the norms and cultural practices, have the potential to strengthen the agency relations, when formal institutions are compromised. While the existing literature gravitates towards stakeholder orientation (Löhde, Campopiano & Calabrò 2021), we believe that family business is a laboratory for the improvement of the agency theory by explaining how power balances, agent−agent interactions and humaneness contribute to consensus-building. Another contribution to business practice is that governance extends beyond contractual agreements. Our study demonstrated that trust and integrity are core elements of governance that enable succession planning.

While some of these formalised agreements are there to meet the legal requirements, a humane orientation should also be central to corporate governance in succession planning. A contribution to policymakers is to engage with family business owners to incorporate a humane orientation into policy development and entrepreneurial support. For example, governance policies should incorporate integrity and fairness in the treatment of individuals. Lastly, these findings can help practitioners to advise family businesses and develop appropriate corporate governance training interventions and mentorship programmes.

As no research is free of drawbacks, several limitations influenced this study. As this study relied on a purposive sample of 12 participants, all located in Johannesburg, Gauteng, the data had limited generalisability. Therefore, future research should use larger samples across various geographic regions. Future research should also compare governance and succession planning across demographic groups, such as gender, racial groups, and industry sectors. Because the study was based on cross-sectional data, a longitudinal study is needed to establish how succession planning and governance unfold over time. Such data will also demonstrate businesses that have failed in the succession process, highlighting another limitation of this study, as it did not include failed family businesses. Another limitation was that our study could not examine the relationship between the progression of generations, the current control generation, governance and succession planning process. Therefore, future research should examine how generational progression influences governance mechanisms.

We focused only on businesses that have already implemented governance and succession mechanisms. More insights are required from businesses that have failed to establish whether they had included succession planning and governance mechanisms. We also did not delve further into the outcomes of succession planning, an area for future exploration. Our study found that some results were limited in their ability to extend the agency theory. Future studies should explore the agent−agent interactions and how they influence the success of the business, instead of focusing on the identified conflicts between siblings and family members.

Furthermore, future research should examine how interaction dynamics change, when one agent becomes the principal, or both agents become principals, in equal partnership arrangements. Also, our study showed that power is another implicit assumption of the agency theory. However, our study did not provide detailed dimensions of power asymmetries in family business succession. It would be interesting to examine the various aspects of power across different types of family businesses. Lastly, our research showed that humaneness, grounded in Ubuntu philosophy, influenced engagement with succession planning, particularly when formal mechanisms were absent or deficient. Future research should examine how informal governance mechanisms, grounded in norms and values, address institutional inadequacies in family businesses. Such norms could also include religious beliefs and their influence on the behaviour of principals and agents.