Publication: Effects of family involvement on the monitoring of CEO compensation
Authors
Sánchez-Marín, Gregorio ; Carrasco-Hernández, Antonio J. ; Danvila-del-Valle, Ignacio
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Facultades, Departamentos, Servicios y Escuelas::Departamentos de la UMU::Organización de Empresas y Finanzas
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Description
©2019 Springer Science+Business Media. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
This document is the Accepted, version of a Published Work that appeared in final form in International Entrepreneurship and Management Journal. To access the final edited and published work seehttps://doi.org/10.1007/s11365-019-00617-1
Abstract
This study examines the effectiveness of CEO compensation monitoring depending on
the extent of family involvement in the firm. Considering the contradictory evidence on
the effects of family involvement on CEO compensation reported by the literature to
date, we adopt a procedural conception of CEO monitoring – that reflect processes and
rules used in family firms for the alignment of CEO incentives structure to the firm
interests –, to test four hypotheses derived from agency and socioemotional wealth
(SEW) perspectives. Using a sample of 357 family and non-family Spanish companies,
the results show that CEO compensation monitoring is inversely related to family
status, and the relationship between CEO compensation monitoring and firm perfor mance is stronger in firms where family influence is higher. In addition, we found that
the presence of a family CEO negatively affects the implementation of economically
instrumental monitoring mechanisms, decoupling CEO compensation from firm per formance. Our research, aligned with recent socio-psychological literature on the study
of processes of family firm’s management policies, thus contributes to a better under standing of the setting of CEO compensation in family firms as a result of a combina tion of common bonds and mutual expectations based on emotions and values with
contractual and financial factors.
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