Ceo pay and family firm heterogeneityA behavioral agency model perspective

  1. Carlos Fernández Méndez 1
  2. Rubén Arrondo García 1
  3. Shams Pathan 2
  1. 1 University of Oviedo, Oviedo, Spain
  2. 2 Curtin University, Bentley, WA, Australia
Journal:
Business Research Quarterly

ISSN: 2340-9444,  2340-9436

Year of publication: 2024

Volume: 27

Issue: 4

Pages: 423-442

Type: Article

DOI: 10.1177/23409444211051754 DIALNET GOOGLE SCHOLAR lock_openOpen access editor

More publications in: Business Research Quarterly

Abstract

We study the effects of family control on CEO pay from the perspective of behavioral agency model (BAM), with particular focus on family firm’s generational stage and CEO family ties. Using a panel of Australian listed firms, we find that family firms present lower total and variable CEO pay, showing also less pay disparity between the CEO and other top executives. We also find that multi-generational family firms and those run by non-family CEOs offer higher total and variable CEO pay and present high pay disparity. The BAM and family’s aversion to socioemotional wealth loss can explain the effects of family control based on the pursuing of non-financial family goals. The decline of these goals derived from the aging of the firm and the hiring of external CEOs shape family control and should be considered in the design of executive compensation policies and by external parties when assessing their suitability.

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