Setting the right mix : analyzing outside directors' pay mix in public family firms

Engel, Pascal J.; Hack, Andreas; Kellermanns, Franz W. (2015). Setting the right mix : analyzing outside directors' pay mix in public family firms. Journal of family business strategy, 6(2), pp. 130-140. Elsevier

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Outside directors’ pay mix determines if and to which extent a firm’s designated monitor is incentivized by means of performance related (PR) pay. Owning families of public firms, still having substantial influence on the compensation process, need to balance the family’s genuine interest against PR pay and non-family stakeholders’ contrasting preferences in setting the right mix. At first, family and non-family firms show no difference regarding the adoption of PR pay. However, among PR pay adopters, we find
family firms to devote greater shares to this pay component, thus sacrificing part of their socioemotional wealth in order to meet stakeholders’ demand. A differentiation between different types of family firms reveals that especially true family firms, i.e. firms managed or owned by at least two family members, account for this particular behavior.

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