Pay for Outsiders: Incentive Compensation for Nonfamily Executives in Family Firms*

• 成果类型: Article
• 署名作者: Li, Zhi; Ryan, Harley E., Jr.; Wang, Lingling
• 署名单位: Chapman University System; Chapman University; University System of Georgia; Georgia State University; University of Connecticut
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12650
• 发表日期: 2021
• 页码: 1139-1176
• 关键词: CORPORATE GOVERNANCE; large shareholder; OWNERSHIP; diversification; determinants; performance; SEPARATION; principal

摘要

We use a hand-collected sample of 1,628 S&P 1500 firms and more than 12,000 executives to examine how family firms compensate nonfamily executives. Family firms comprise a large percentage of firms around the world, and most of their executives are not members of the founding family. Moreover, the founding family's engagement in the firm alters agency conflicts, which in turn should influence the design of incentive compensation. However, there is no empirical evidence on whether and how the incentive compensation of nonfamily executives differs between family and nonfamily firms. Our study intends to fill this gap in the literature. Consistent with our predictions, nonfamily executives in family firms receive significantly less performance-based pay and equity-based pay. Family monitoring, risk aversion, and a reluctance to dilute family ownership all contribute to the pay differences. Although incentive pay and total pay are lower in family firms, nonfamily executives receive safer pay and enjoy greater job stability. An analysis of executives' moves across firms suggests that ownership structure, not executives' preferences, is more likely the driver of pay differences between family and nonfamily firms. Our findings suggest that researchers should consider founding family's engagement to avoid misleading inferences with regard to the determinants of incentive compensation, and our findings should help compensation consultants better understand and implement pay packages for family firms and nonfamily firms. The results also imply that uniform compensation regulations intended to improve the monitoring of executives in widely held firms may not be as effective in family firms.