Family CEOs vs. Nonfamily CEOs in the Family-Controlled Firm: An Examination of the Level and Sensitivity of Pay to Performance
- 1 June 2000
- journal article
- Published by SAGE Publications in Family Business Review
- Vol. 13 (2), 121-131
- https://doi.org/10.1111/j.1741-6248.2000.00121.x
Abstract
This study examines CEO compensation in 82 founding-family-controlled firms; 47 CEOs are members of the founding family and 35 are not. It tests the family incentive alignment hypothesis, which predicts that family CEOs have superior incentives for maximizing firm value and, therefore, need fewer compensation-based incentives. Univariate and multivariate analyses show that family CEOs' compensation levels are lower and that they receive less incentive-based pay—confirming the family incentive alignment hypothesis and suggesting the possible need for family firms to increase CEO compensation when they replace a founding family CEO with a nonfamily-member CEO.Keywords
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