Executive compensation inside family-controlled firms

: is self-motivation enough?

Abstract

The purpose of this research is to analyse the differences in chief executive officer (CEO) pay-to-performance sensitivity in family and non-family controlled firms. The corporate governance literature argues that CEOs in family businesses have superior incentives with regards to maximizing firm performance and therefore require less compensation-based incentives. In order to validate such assumptions, an analysis was carried out to test whether family CEOs´ total compensation and performance-based incentives are lower than in non-family controlled firms. Employing a fixed effects panel data regression on a sample of 80 firms it is shown that neither total pay nor equity-based compensation seems to be affected by the ownership structure of the firm. Furthermore, the change in the compensation scheme for a firm that replaced a family CEO with a non-family executive was studied. The case study suggests that family controlled firms should increase compensation of non-family related CEOs.

Date of Award	4 Nov 2015
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Geraldo Cerqueiro (Supervisor)