The Impact of Family Representation on CEO Compensation

James G. Combs, Christopher R. Penney, T. Russell Crook and Jeremy C. Short

Entrepreneurship Theory and Practice, 2010, vol. 34, issue 6, 1125-1144

Abstract: Understanding the nature of family representation in public firms has been an important topic for entrepreneurship research. Because CEO compensation is a key tool that boards use to align the interests of shareholders and managers, researchers have taken steps toward understanding how family representation affects CEO compensation. Prior research has painted family–member CEOs as stewards who accept lower compensation. Based on agency theory, we describe a different scenario wherein family representatives engage in strategic control that reduces family–member CEOs‘ compensation. Thus, family–member CEOs accept lower compensation only when additional family members are represented in management or on the board. In comparison with CEOs at nonfamily firms, we find that family–member CEO compensation is 13% lower when multiple family members are involved, but 56% higher when the CEO is the lone family member.

Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:sae:entthe:v:34:y:2010:i:6:p:1125-1144

DOI: 10.1111/j.1540-6520.2010.00417.x

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