Fe nández Méndez, Ca los; A ondo Ga cía, Rubén; Pa han, Shams
A icle
CEO pay and amily i m he e ogenei y: A beha io al
agency model pe spec i e
BRQ Business Resea ch Qua e ly
P o ided in Coope a ion wi h:
Asociación Cien í ica de Economía y Di ección de Emp esas (ACEDE), Mad id
Sugges ed Ci a ion: Fe nández Méndez, Ca los; A ondo Ga cía, Rubén; Pa han, Shams (2024) : CEO
pay and amily i m he e ogenei y: A beha io al agency model pe spec i e, BRQ Business Resea ch
Qua e ly, ISSN 2340-9444, Sage Publishing, London, Vol. 27, Iss. 4, pp. 423-442,
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In oduc ion
The Aus alian Council o Supe annua ion In es o s has
ecen ly wa ned abou he high le el o bonuses ecei ed
by Aus alian CEOs, cas ing doub s abou he compa ibil-
i y o CEO pay design wi h inc eased i m pe o mance.
This la ge and g owing CEO pay has a ac ed a en ion
om in es o s, egula o s, policy make s, and he aca-
demia which examines he ac o s ha could po en ially
explain he CEO pay le el and s uc u e (Hooghiems a
e al., 2017). Bea ing he highes esponsibili y CEOs gen-
e ally ecei e he op pay, bu i s apid inc ease in he las
yea s has led o an objec ionable inc ease on pay inequal-
i y be ween he CEOs and he es o he employees
(Muelle e al., 2017).
Cu en ly, amily i ms ca y he main weigh o any
economy, whe he local, egional, na ional, o in e na-
ional (Villalonga & Ami , 2020; Zellwege , 2017).
De ining amily i ms is no a i ial ma e and mul iple
de ini ions o his ype o i ms ha e been used so a .
Mos de ini ions a e based on he equi emen o a mini-
mum owne ship s ake o he amily ha allows o con ol
he company ia sha eholde igh s (Wa d & Dolan, 1998).
In he case o lis ed amily i ms, a 20%–25% con ol
h eshold is accep ed (Ande son & Reeb, 2003; Villalonga
& Ami , 2006; Zellwege , 2017). Also, o ha e a b oade
iew o he i m’s con ol s uc u e, some de ini ions
equi e ha he amily is p esen in he boa d o di ec o s
and/o he managemen (Chua e al., 1999).
Despi e he g owing esea ch on he opic o amily
i ms, Alessand i e al. (2018) call o u he esea ch on
he gene a ional s age and CEO amily ies as elemen s
ha con igu e amily con ol. Mo eo e , Gómez-Mejía
e al. (2019) claim ha ou unde s anding o he impac o
CEO pay and amily i m he e ogenei y:
A beha io al agency model pe spec i e
Ca los Fe nández Méndez1, Rubén A ondo Ga cía1
and Shams Pa han2
Abs ac
We s udy he e ec s o amily con ol on CEO pay om he pe spec i e o beha io al agency model (BAM), wi h
pa icula ocus on amily i m’s gene a ional s age and CEO amily ies. Using a panel o Aus alian lis ed i ms, we ind
ha amily i ms p esen lowe o al and a iable CEO pay, showing also less pay dispa i y be ween he CEO and o he
op execu i es. We also ind ha mul i-gene a ional amily i ms and hose un by non- amily CEOs o e highe o al
and a iable CEO pay and p esen high pay dispa i y. The BAM and amily’s a e sion o socioemo ional weal h loss can
explain he e ec s o amily con ol based on he pu suing o non- inancial amily goals. The decline o hese goals de i ed
om he aging o he i m and he hi ing o ex e nal CEOs shape amily con ol and should be conside ed in he design
o execu i e compensa ion policies and by ex e nal pa ies when assessing hei sui abili y.
JEL CLASSIFICATION: G30; G32; G34; G38
Keywo ds
Family i m, socioemo ional weal h, gene a ional s age, CEO pay, CEO amily ies
1 Depa men o Business Adminis a ion, School o Economics and
Business, Uni e si y o O iedo, O iedo, Spain
2 School o Economics, Finance, and P ope y, Cu in Uni e si y,
Ben ley, WA, Aus alia
Co esponding au ho :
Ca los Fe nández Méndez, Depa men o Business Adminis a ion,
School o Economics and Business, Uni e si y o O iedo, A da. del
C is o s/n, O iedo 33071, Spain.
Email: [email p o ec ed]
1051754BRQ0010.1177/23409444211051754Business Resea ch Qua e lyFe nández Méndez e al.
esea ch-a icle2021
Regula Pape
424 Business Resea ch Qua e ly 27(4)
amily con ol on execu i e pay is s ill limi ed. We join ly
espond o hese calls by analyzing he in luence o hese
sou ces o amily i m he e ogenei y on execu i e pay
design.
Al hough amily i m esea ch has e ol ed om a
pu ely agency pe spec i e o a mo e socio-psychological
app oach (Jaskiewicz & Dye , 2017), i is s ill no well
unde s ood how socioemo ional weal h p ese a ion ela e
o amily i m’s managemen . Sánchez-Ma ín e al. (2020)
and Belda-Ruiz e al. (2021) con ibu e o his line o s udy
by analyzing how socioemo ional weal h goals a ec he
di idend policy and he le el o CEO compensa ion moni-
o ing, espec i ely.
In he speci ic case o execu i e pay design in amily
i ms, he use o he agency heo y b ings impo an limi a-
ions in explaining how he con igu a ion o CEO pay may
be a ec ed by he beha io s, goals, and a ec i e needs o
amily i ms (K aiczy e al., 2015; Sciascia e al., 2014).
The agency heo y conside s ha he use o con ingen pay
can align he in e es o highly isk-a e se execu i es wi h
hose o he mo e isk-seeking owne s. Howe e , he
beha io al agency model (BAM) p oposes ha execu i es
a e no necessa ily mo e isk a e se han he p incipals,
bu ha hei isk p e e ences depend on mul iple elemen s
o he con ex (Wiseman & Gómez-Mejía, 1998).
Speci ically, he execu i e’s isk a e sion will depend on
he le el o p o ec ion o he u u e base pay wi h espec
o he nega i e ou comes de i ed om isky in es men
decisions. I he execu i e’s posi ion and i s base pay a e
p o ec ed by amily ies, he o his isk a e sion migh be
simila o ha o he owne s. Mo eo e , he in luence o
he execu i es’ con ingen pay on hei isk a e sion can be
nega i e, posi i e, o e en nonexis en .
When conside ing he ole o amily owne ship om a
BAM pe spec i e, Gómez-Mejía e al. (2007) p opose ha
he p ima y e e ence poin o amily g oups is he loss o
socioemo ional weal h de i ed om he i m’s ailu e o
he loss o he amily con ol. Consequen ly, amily g oups
will model CEO compensa ion con ac s in a way ha
minimizes he likelihood o his ype o e en .
The absence o a consis en ela ionship be ween amily
con ol and execu i e’s pay (Michiels e al., 2020) b ings
us he no ion ha he e a e aspec s o amily i m’s he e o-
genei y ha ha e been insu icien ly co e ed by cu en
esea ch. The design o execu i e pay in amily i ms is
pa icula ly challenging due o he in luence o non- inan-
cial amily goals (Helsen e al., 2017) ha e ol e h ough
gene a ions and a ec di e en ly amily and non- amily
execu i es. In he i s place, he iden i ica ion o all am-
ily membe s wi h a common se o amily goals migh
debili a e wi h he na u al eme gence o mul iple amily
b anches h ough he e olu ion o gene a ions (Ensley &
Pea son, 2005; Muñoz-Bullon e al., 2018). In he second
place, he execu i es’ iden i ica ion wi h non- inancial
amily goals depends on hei amily membe ship.
Consequen ly, he ela ion o amily con ol wi h execu i e
compensa ion will depend on he gene a ion in con ol
(Gómez-Mejía e al., 2019) and amily CEO a ilia ion
(Gómez-Mejía e al., 2003, 2019).
P e ious s udies ha e analyzed he e ec o amily con-
ol and he CEO’s amily ies on execu i e compensa ion,
ob aining e idence o a g ea e es ain o execu i e com-
pensa ion in companies wi h amily con ol and amily
CEO (Gómez-Mejía e al., 2003; Palmbe g, 2012). In addi-
ion, Gómez-Mejía e al. (2003) and Ko and So (2012)
showed a s onge p e e ence o he ixed elemen s wi hin
he CEO pay mix in companies wi h amily con ol. O he
au ho s conside he e ec o he gene a ion in con ol and
he CEO amily ies on execu i e pay design. Michiels
e al. (2013), om an agency pe spec i e, ob ain e idence
o a posi i e pay pe o mance ela ionship in unlis ed am-
ily i ms. Ba on ini and Bozzi (2018), om he s ewa d-
ship heo y, ob ain e idence ha he p esence o mul iple
amily membe s in he boa d lowe s CEO pay size in
descendan -con olled amily i ms, and has he opposi e
e ec in ounde -con olled i ms, ha ing no e ec when
he CEO is no a amily membe .
Ou wo k adds o he li e a u e on execu i e pay in
amily i ms by conside ing he amily gene a ion in con-
ol and CEO’s amily ies wi hin he heo e ical ame-
wo k o he BAM. Con a y o o he p e ious wo ks
close o he adi ional a gumen s o agency heo y, in
his a icle, we combine he pos ula es o BAM and he
amily i m’s li e a u e o p edic he e ec o amily con-
ol on he size and design o CEO pay. To he bes o ou
knowledge, his is he i s wo k ha analyzes he e ec o
he gene a ional ansi ion in amily i ms on he CEO’s
emune a ion policy om he BAM’s pe spec i e. In
addi ion, we analyze no only he amoun and he compo-
si ion o he CEO’s emune a ion, bu also CEO pay dis-
pa i y in ela ion o o he op execu i es. Using pay
dispa i y as an indica o o he concen a ion o powe in
he hands o he CEO, we p o ide di ec e idence abou
he e ec ha amily con ol, he amily gene a ion, and
CEO amily ies ha e on he ba gaining powe o he CEO
is a is he con olling sha eholde s. Ou indings will be
use ul o gain be e unde s anding o he ole played by
execu i e compensa ion policies in he concilia ion
be ween he main enance o he socioemo ional weal h
and he need o keep he long- e m inancial iabili y o
amily i m.
The emainde o his a icle is o ganized as ollows. In
Sec ion “Theo e ical amewo k and hypo hesis de elop-
men ,” we summa ize he heo e ical amewo k and p o-
pose h ee se o hypo heses. We hen discuss ou sample
and empi ical amewo k in Sec ion “Da a and sample
selec ion” while Sec ion “Empi ical me hod and esul s”
elabo a es ou main esul s and some obus ness es s.
Finally, we conclude he a icle in Sec ion “Discussion and
conclusion.”
Fe nández Méndez e al. 425
Theo e ical amewo k and
hypo hesis de elopmen
CEO pay in amily i ms
Li e a u e on amily i ms indica es ha amily i ms
beha e di e en ly han i ms no con olled by a amily
(Be and & Schoa , 2006). Fi s , he o e lapping o sha e-
holde s and manage s belonging o he amily g oup con-
ibu es o alle ia e he con lic s o in e es be ween
owne ship and con ol. Second, amily owne s a e o en
desc ibed as “pa ien capi al” (De Vissche e al., 1995),
implying ha he long un comp omise o amily membe s
wi h hei i m make e m o ocus on he long- e m esul s
a he han sho - e m qua e ly e u ns. Consequen ly,
amily i m’s managemen su e s a lowe exposu e o
sho - e m changes in economic condi ions. Mo eo e , in
amily i ms, bo h i m and amily sys ems coexis and a e
in e dependen , wi h amily and business economic con-
side a ions shaping he i m’s a ai s. This si ua ion can
lead o con lic s be ween he di e en agen s in ol ed in
he o ganiza ion (Simon e al., 2012).
Acco ding o BAM, amily owne s p esen di e en
isk p e e ences o non- amily sha eholde s (Gómez-Mejía
e al., 2011). Compa ed o non- amily sha eholde s, he
amily p incipal aces highe isk exposu e because ami-
ly’s in es men is highly concen a ed in a single o ganiza-
ion, which in case o ailu e implies a ca as ophic loss o
socioemo ional and inancial weal h o he amily g oup.
Gómez-Mejía e al. (2007) p opose ha amily owne s a e
especially wo ied abou he loss o socioemo ional weal h,
de i ed om i s con ol posi ion in he amily i m.
Be one e al. (2012) iden i y i e dimensions o his soci-
oemo ional weal h (SEW) endowmen : amily con ol and
in luence, iden i ica ion o amily membe s wi h he i m,
binding social ies, emo ional a achmen o amily mem-
be s, and enewal o amily bonds o he i m h ough
dynas ic succession. Keeping hese a ec - ela ed alues
equi es main aining amily con ol o e he i m in he
long e m, which incen i es s ong manage ial moni o ing
o ensu e he company’s long- e m iabili y.
Acco ding o he g ea e con ol incen i es o amily
owne s and hei long- e m in es men ho izon due o he
concen a ion o owne ship and con ol in he amily
g oup, he isk o CEO’s oppo unis ic beha io is lowe in
amily i ms (Schulze e al., 2001) and amily membe s a e
p one o al uis ic beha io s (Dye , 2003). Mo eo e , he
impo ance o non- inancial goals linked o he p ese a-
ion o amily con ol o he i ms implies ha economic
en s ex ac ed om he i ms become less ele an , hus
amily i ms may o e a lowe le el o compensa ion o
hei CEO. Consis en wi h hese a gumen s, p e ious
s udies co obo a e he lowe need o high CEO pay le els
in amily i ms (Combs e al., 2010; C oci e al., 2012;
Palmbe g, 2012).
Family con ol and high- isk concen a ion migh no
only a ec he size o CEO pay bu also he need o use
speci ic pay componen s ha mo i a e he CEO’s loyal y
o he company and o he in e es s o he amily. Acco ding
o Conyon (2006), he o al compensa ion o CEO gene -
ally consis s o ou componen s: (1) base sala y; (2) sho -
e m bonus, which is gene ally linked o i m pe o mance;
(3) s ock op ions gi ing CEO he igh o buy company
sha es in he u u e; and (4) inge bene i s such as long-
e m incen i e plans o e i emen plans. Fixed compensa-
ion includes he base sala y, supe annua ion paymen s,
di ec o s’ ees, and in gene al, componen s no linked o
pe o mance achie emen s. Va iable compensa ion
includes elemen s such as sho - e m bonus, s ock op ions,
es ic ed sha es, and o he long- e m incen i e con ac s.
The p eponde ance o non- inancial goals o e inan-
cial goals is conside ed in he li e a u e as a majo ac o
ha di e en ia es amily om non- amily i ms (Be one
e al., 2012; Gómez-Mejía e al., 2007, 2011). This o me
g oup o a ge s, also known as socioemo ional objec i es,
is closely linked o main aining amily con ol o e he
company (Be one e al., 2012). F om BAM’s pe spec i e,
he e ec o con ingen emune a ion on he agen s’ isk
a e sion can be posi i e, nega i e, o null depending on
he con ex and i can pose a dange o socioemo ional
weal h. In addi ion, he use o op ion and equi y-based
compensa ion can al e he i m’s owne ship s uc u e
e oding amily con ol. Family i ms will a oid he use o
such compensa ion sys ems because hey may debili a e
he amily’s abili y o exe cise un es ic ed au ho i y, in lu-
ence, and powe (Schulze e al., 2003b), which a e espe-
cially ele an o p ese ing socioemo ional weal h
(Gómez-Mejía e al., 2007).
Acco dingly, Block (2008) inds ha he base sala y o
CEO pay is highe o amily i ms. Simila ly, Ko and So
(2012) and Palmbe g (2012) ind s ong e idence ha am-
ily i ms in Hong Kong and Sweden, espec i ely, end o
use mo e o ixed-based pay as opposed o pe o mance-
based pay ( a iable pay) o hei CEOs compa ed o non-
amily i ms. Weisskop (2012) e idences ha amily
i ms use cash compensa ion in place o equi y-based pay,
being equi y-based pay less necessa y as la ge amily
sha eholde s ha e an e iden incen i e o con ol manage-
men . Palmbe g (2012) co obo a es his easoning and
shows ha CEOs in non- amily i ms ecei e compensa-
ion in s ock op ions mo e o en han CEOs in amily
i ms.
Execu i e pay design can lead ei he o si ua ions o an
equali a ian dis ibu ion o compensa ion o o a high dis-
pa i y among op execu i es. High pay dispa i y be ween
he CEO and he es o he execu i es is conside ed as a
sign o CEOs ba gaining powe and CEOs en enchmen
(Bebchuk & F ied, 2003). The design o execu i e pay in
amily i ms can be in luenced by amily al uis ic mo i a-
ions (Kole, 1997), and he lack o a clea link wi h
426 Business Resea ch Qua e ly 27(4)
pe o mance may ende pay o mulae a he opaque. In
his con ex , high le els o pay dispa i y would be di icul
o unde s and by he execu i e eam membe s and would
gene a e a sense o injus ice and inequali y. Family i ms
ha e he e o e mo i a ions o main ain low le els o exec-
u i e pay dispa i y o a oid dys unc ional consequences
among execu i e eam membe s such as jealousy (Ensley
e al., 2007).
Mo eo e , om he BAM’s pe spec i e, when he long-
e m gene a ional ou look o amily i ms is conside ed, i
is expec ed ha amily owne s and execu i es will in es
al uis ically pe sonal esou ces o he bene i o he am-
ily i m (Lim e al., 2010). Al uis ic amily membe s
migh a o a mo e equali a ian sha e o he i m’s
esou ces alloca ed o execu i es’ compensa ion esul ing
in low pay dispa i y among op execu i es.
Conside ing he p eceding discussions abou he e ec
o amily con ol on execu i e emune a ion, we p edic as
ollows:
Hypo hesis 1a. CEO o al pay is lowe in amily i ms
compa ed o non- amily i ms.
Hypo hesis 1b. CEO a iable pay is lowe in amily
i ms compa ed o non- amily i ms.
Hypo hesis 1c. CEO pay dispa i y is lowe in amily
i ms compa ed o non- amily i ms.
The e ec o he gene a ion in con ol
So a , we ha e a gued ha in amily i ms CEO pay is
lowe in e ms o incen i e-based pay and pay dispa i y
due o he p edominance o amily non- inancial goals.
Howe e , he amily ele ance o manage ial compensa-
ion migh depend on he s age o he li e o he i m wi h
di e ences be ween he i s gene a ion ( ounde -con-
olled i ms) and subsequen gene a ions (descendan -
con olled i ms).
P io academics de ine gene a ional s age as “ he gen-
e a ion ha con ols and manages he amily business”
(Kelle manns & Eddles on, 2006; Kelle manns e al.,
2008; Sciascia e al., 2014). O e ime, he amily g oup
na u ally e ol es h ough he eme gence o mul iple am-
ily b anches. As a esul , amily membe s’ iden i ica ion
wi h he whole g oup declines and hey become mo e com-
mi ed wi h hei own amily b anch and s a ollowing
hei own agendas (Ensley & Pea son, 2005; Ge sick e al.,
1997). Ra he han he maximiza ion o he ex ended am-
ily wel a e, di e en amily membe s make decisions
aimed o inc ease he wel a e o hei own nuclea amily
(Luba kin e al., 2005). The in e es o each amily b anch
will shi om he gene a ion o long- e m en s o he
whole amily o cap u ing as much sho - e m en s o he
nuclea amily as possible (Van Aaken e al., 2017).
The gene a ional e olu ion o he amily g oup implies
ha amily con ol is dis ibu ed among mul iple amily
b anches. As a esul , some o e en all o hem will lose he
abili y o exe cise indi idual con ol o he company. The
BAM conside s he a e sion o ca as ophic losses o soci-
oemo ional weal h due o he loss o he amily i m’s con-
ol as he main non- inancial incen i e o he amily
g oup. Fo hose amily b anches wi h a mino i y s ake in
he amily i m, he main enance o con ol is no longe he
p ima y objec i e guiding hei beha io . A weakening o
he socioemo ional objec i es is he e o e o eseen, while
he inancial objec i es will emain. Consequen ly, he dis-
pe sion o owne ship among amily b anches may change
hei incen i es o di ec supe ision and hei a e sion o
i m’s isk exposu e. Bo h issues can a ec he design o
CEO compensa ion.
In addi ion, he mul iplica ion o amily membe s beyond
he numbe o a ailable op execu i e posi ions o en
implies ha some amily membe s wo k o he company
and o he s become passi e in es o s. The la e become less
emo ionally a ached o he i m and beha e mo e like ex e -
nal in es o s (Schulze e al., 2003a). The loss o he emo-
ional a achmen wi h he amily i m will weaken he loss
o socioemo ional weal h, p edic ed by he BAM as he
main d i e o amily membe s a i udes owa d he i m
(Gómez-Mejía e al., 2007; Wiseman and Gómez-Mejía,
1998). These amily membe s will pu sue sho - e m goals
a he han sus aining in he long e m he amily socioemo-
ional weal h (Dou e al., 2014). Non-managing sha ehold-
e s o en wan o boos hei economic e u ns om he i m
ei he by selling hei s akes o ex e nal in es o s o by
demanding high di idends (Van Aaken e al., 2017).
The ise in he numbe o amily b anches can engende
compe i ion o he sca ce posi ions and esou ces o he
i m (Lim e al., 2010). This inc eased compe i ion can
exace ba e he con lic s among amily membe s and
educe al uis ic and coope a i e beha io o he whole
amily g oup. As a esul , al uism becomes a omized (Le
B e on-Mille & Mille , 2013). Al oge he , he subs i u ion
o ex ended amily common in e es s by he nuclea house-
hold’s inancial goals migh lead o an inc ease o con lic-
i e amily ela ions and he educ ion o al uis ic
beha io . This ypical scena io in amily i ms a e he
i s gene a ion may ha e implica ions o he CEO pay as
sel -se ing CEOs migh p e e high and ixed compensa-
ion e en a he cos o he in e es s o he es o he sha e-
holde s and execu i es including o he amily membe s.
This si ua ion will esul p esumably also in he gene a ion
o wide pay gaps wi h o he execu i es.
The e o e, we p edic as ollows:
Hypo hesis 2a. CEO o al pay is highe in mul i-gene -
a ional amily i ms compa ed o he i s -gene a ion
amily i ms.
Fe nández Méndez e al. 427
Hypo hesis 2b. CEO ixed pay is highe in mul i-gene -
a ional amily i ms compa ed o he i s -gene a ion
amily i ms.
Hypo hesis 2c. CEO pay dispa i y is highe in mul i-
gene a ional amily i ms compa ed o he i s -gene a-
ion amily i ms.
CEO’s amily ies
CEOs in amily i ms a e no always membe s o he
owne amily and amily and non- amily CEOs migh be
a ec ed by execu i e pay design di e en ly (Gómez-
Mejía e al., 2019). The use o con ingen pay ( a iable
compensa ion linked o he achie emen o some a ge o
pe o mance) in he compensa ion package design does
no necessa ily esul in g ea e isk- aking as pos ula ed
by he agency heo y (Wiseman and Gómez-Mejía, 1998).
I s e ec on isk- aking depends on how i may a ec he
p esen alue o u u e base pay ( he po ion execu i e’s
assu ed income). Base pay is ied di ec ly o an execu i e’s
cus oma y s anda d o li ing, whe eas a iable pay is used
o suppo ing he consump ion o nonessen ial i ems. The
use o isky s a egies o gain access o con ingen pay
migh h ea en he execu i e’s posi ion in case hese s a e-
gies ail o deli e he equi ed pe o mance, pu ing in
dange u u e base pay and consequen ly he base o he
execu i e’s s anda d o li ing. Family execu i es a e usu-
ally p o ec ed agains losing hei jobs in he e en o nega-
i e ou comes o isky s a egies, while he non- amily
execu i es migh easily lose hei jobs. The BAM pos u-
la es ha a oiding he loss o consolida ed weal h is he
main mo i a ing o ce o agen s (Wiseman and Gómez-
Mejía, 1998). The e o e, highe job secu i y o amily
CEOs and i s esul ing p o ec ion agains loss o weal h
makes con ingen pay o ha e di e en e ec s on amily
and non- amily CEO’s isk appe i e. Speci ically o e ing
con ingen pay amily CEOs migh ha e he undesi able
e ec o excessi e isk- aking since hey a e p o ec ed
om unemploymen isk.
CEO amily ies migh a ec he alignmen o hei
goals wi h hose o he amily (Cui e al., 2018). F om he
s andpoin o he BAM, amily CEOs a e na u ally aligned
wi h he p e e ences o he con olling amily g oup
(Gómez-Mejía e al., 2019). Family CEOs enjoy job secu-
i y e lec ed by longe enu es (Gómez-Mejía e al., 2001)
and socioemo ional bene i s ha would no be expe ienced
by a non- amily CEO. Family CEOs play he oles o s ew-
a ds (Diéguez-So o e al., 2017) and main ep esen a i es
o amily in e es s in he company (Beeh e al., 1997).
Thei iden i ica ion wi h he amily in e es s p o ides hem
wi h a mo i a ion o hold al uis ic beha io s wi h he am-
ily g oup (Schulze e al., 2002) making hem mo e sensi i e
o he nega i e consequences o he amily in e es s.
Family CEOs who main ain al uis beha io accep lowe
le els o o al pay while hey ul ill al e na i e non- inan-
cial goals (Gómez-Mejía e al., 2011). The e o e, highly
mo i a ed amily CEOs sel - egula e, as a esul , he e is
less need o use incen i es while he opposi e is expec ed
o ex e nal CEOs. The in ense use o a iable pay o mu-
lae in he case o ex e nal CEOs will esul in high execu-
i e pay dispa i y (Eh enbe g & Bognanno, 1990).
In sum, he high le el o amily- ela ed socioemo ional
bene i s ecei ed by amily CEOs would imply ha hey
will demand lowe le els o pecunia y compensa ion com-
pa ed o non- amily CEOs. Also, he s onge alignmen
wi h he amily in e es s would sugges a lowe need o
incen i e pay. All hese elemen s, join ly wi h he exis -
ence o mo i a ions o beha e al uis ically wi h amily
membe s, would esul in a na owe pay gap be ween
amily CEOs and he es o he op manage s.
In his sense, we p opose he ollowing hypo hesis:
Hypo hesis 3a. Family CEOs ecei e lowe o al pay
compa ed o non- amily CEOs wi hin amily i ms.
Hypo hesis 3b. Family CEOs ecei e lowe a iable
pay compa ed o non- amily CEOs wi hin amily
i ms.
Hypo hesis 3c. Family CEOs obse e lowe pay dispa -
i y compa ed o non- amily CEOs wi hin amily
i ms.
Da a and sample selec ion
Resea ch con ex
The Aus alian ma ke p o ides an ideal se ing o analyze
he e ec o amily i m’s he e ogenei y de i ed om he
gene a ion in con ol and he ec ui men o non- amily
CEOs because amily i ms ep esen a 70% o all
Aus alian i ms wi h 81% o owne s dealing wi h succes-
sion and selec ion o new CEOs du ing he las decade1
(KPMG & Aus alia FBA, 2009). In addi ion, he con inu-
ous g ow h expe ienced by he Aus alian economy om
1991 o 2020 p o ides us wi h a s able window o s udy,
eluding he con ounding e ec s de i ed om he 2008
Global Financial C isis.
Sample and da abases
We s a ed he p ocess o classi ica ion o amily and non-
amily i ms using as ou ini ial sample he o al numbe o
Aus alian S ock Exchange (ASX) lis ed companies
included in he Boa d oom da abase o he yea 20112
(1854 i ms). We excluded om ou sample inancial i ms
and u ili ies (246 i ms) lea ing us a g oup o 1,608 i ms.
F om his se , we ha e excluded a g oup o 469 companies
ha do no p o ide enough in o ma ion o classi y hem
428 Business Resea ch Qua e ly 27(4)
ei he as amily o non- amily i ms, such as he missing
in o ma ion on he boa d o di ec o s o owne ship and
managemen s uc u es. We also exclude companies whe e
owne ship is e enly spli be ween a man and a woman
wi hou in o ma ion abou hei ma i al s a us and i ms
belonging o se e al amily g oups. This p ocess esul s in
a sample o 10,918 i m-yea obse a ions on 1,139 non-
inancial and non-u ili y ASX lis ed i ms be ween 2004
and 2018 o which we ha e a comple e desc ip ion o
hei owne ship and boa d s uc u es (i.e., he iden i ies o
he op sha eholde s, op execu i es, and di ec o s). We
ha e elimina ed i m-yea obse a ions o which we do
no ha e execu i e compensa ion da a, o we ind mo e
han one execu i e se ing as CEO du ing he yea o we
obse e a CEO change du ing he yea esul ing in 6,838
obse a ions. We hen elimina e i ms o which we do no
ha e hei yea o ounda ion which lea es us wi h 6,224
i m-yea obse a ions. Finally, we elimina e i ms o
which we do no ha e inancial da a, ma ke alues, o
daily e u ns lea ing us wi h an unbalanced panel o 4,581
i m-yea obse a ions co esponding o 501 i ms ha on
a e age ep esen 72% o he ASX ma ke capi aliza ion o
non- inancial and non-u ili y i ms o he whole pe iod o
s udy.
All da a ela ing o he execu i e’s compensa ion,
boa ds, and commi ees’ s uc u es a e om Connec 4
Boa d oom da abase. The accoun ing da a which is used o
de e mine he size o he company, i s p o i abili y, and
le e age comes om Capi al IQ and Mo gan S anley da a-
bases. Finally, he sha e p ices, necessa y o es ima e ma -
ke isk and e u ns, a e om Capi al IQ and Da aS eam
da abases.
Measu emen o a iables
Ou a icle analyzes he ele ance o amily con ol on
h ee di e en aspec s o he execu i e’s compensa ion:
CEO o al pay, i s composi ion ( a iable s ixed pay), and
pay dispa i y be ween he CEO o al pay and he o al pay
o he highes non-CEO execu i es.
The i s dependen a iable is he na u al loga i hm o
he CEO o al pay measu ed in Aus alian Dolla s (TOTAL
PAY). TOTAL PAY includes all componen s o he CEO
compensa ion: ixed, a iable, sho o long- e m o any
na u e: cash, non-pecunia y, equi y, o op ion based (C oci
e al., 2012). Also ollowing C oci e al. (2012) and
Voulga is e al. (2010), we cap u e he CEO pay s uc u e
o design wi h he p opo ion o ou elemen s in ela ion
o o al CEO pay: sala y (SALARY), bonus (BONUS),
equi y and op ion-based pay (EQUITY OPTIONS), and
a iable pay (VARIABLE PAY). In addi ion, we use wo
measu es o pay dispa i y be ween CEO o al compensa-
ion and he highes o al pay o he non-CEO execu i es:
he a io o CEO o al pay and he highes o al pay o he
op non-CEO execu i es (PAY SLICE) and he di e ence
be ween he log ans o ma ion o CEO o al pay and log
ans o ma ion o he highes o al pay o he op non-CEO
execu i es (PAY GAP).
We analyze he e ec s o amily con ol and wo addi-
ional cha ac e is ics: he gene a ion in con ol and he
amily ies o he CEO. Family con ol o he i ms is cap-
u ed by a bina y a iable ha akes alue one i he i m is
amily con olled and ze o o he wise (FAMILY). As he
ocus o his a icle is o examine he execu i e compensa-
ion o amily i ms lis ed in he ASX, he i s challenge is
o iden i y hose amily i ms. In he absence o any o i-
cial da abase o amily i ms in Aus alia, we classi y am-
ily i ms ollowing he owne ship and go e nance c i e ia
adop ed by p io s udies such as Chua e al. (1999),
Ande son and Reeb (2003), Villalonga and Ami (2006), o
Zellwege (2017). Pa icula ly, we de ine a company as a
amily i m i he ounding amily o a membe o he am-
ily g oup by ei he blood o ma iage o a p i a e indi id-
ual owns a leas 20% o he company’s sha es (minimum
con ol) and a leas one amily membe is an execu i e o
boa d di ec o (go e nance).
I is o en he case ha he owne ship s uc u e o he
companies does no p esen a single majo i y sha eholde .
A i m’s owne ship s uc u e is o en composed o a chain
o di ec and indi ec holdings, wi h sha es in he hands o
o he i ms, holding companies, amily unds, and so on.
Fo his eason, when sha eholde s we e such en i ies as
o he companies o ins i u ional in es o s, we ha e exam-
ined owne ship chains o ace he ul ima e indi idual
owne . Consequen ly, ou classi ica ion o ASX lis ed
i ms as amily o non- amily i ms in ol es many man-
hou s o hand collec ion and in-dep h e iews o bo h
owne ship and boa d s uc u es o all sample i ms.
F om he analysis o he owne ship da a epo ed in he
OSIRIS da abase, we classi y a i m as amily con olled i
he la ges sha eholde is “one pe son o a g oup o amily
ela ed people” wi h a sha eholding abo e 20%. When he
owne ship is sha ed by a g oup o indi iduals who accu-
mula e a combined majo i y sha e o a leas 20%, we ana-
lyze he ela ionship be ween indi iduals o de e mine
whe he he e is any amily bond be ween hem. The usual
p ac ice o de e mine a amily ela ionship is o ma ch hei
su names.
The gene a ion in con ol ( i s gene a ion s second
gene a ion and beyond) is p oxied by a bina y a iable ha
akes alue one i he i m is in second gene a ion o
beyond ( i m’s age is abo e 30 yea s) and ze o o he wise
(MULTI GEN). We ha e chosen his speci ic ime span
ollowing Handle (1994) and Menéndez-Requejo (2006),
who no ed ha in e gene a ional succession en ails an age
gap o en o 25–30 yea s. I socioemo ional weal h declines
in second and subsequen gene a ions o con ol, we expec
his a iable o ela e posi i ely o CEO o al pay, o he
Fe nández Méndez e al. 429
weigh o a iable pay, and o pay dispa i y. The CEO am-
ily a ilia ion is cap u ed by a bina y a iable ha akes
alue one i he CEO belongs o he amily in con ol and
ze o o he wise (CEOFAM). Consis en wi h ou p e ious
heo e ical discussion, we would expec amily i ms and
amily CEOs o ela e nega i ely o CEO pay size and o
pay dispa i y.
We include a se o eigh con ol a iables o boa d
s uc u e, and o he i m cha ac e is ics conside ed o
in luence execu i e compensa ion. Pa icula ly, we con ol
wo elemen s o he boa d s uc u e: boa d size (BD SIZE)
and he p opo ion o independen di ec o s (BD INDEP).
BD SIZE is he na u al loga i hm o he numbe o boa d
di ec o s, while BD INDEP is he numbe o independen
di ec o s scaled by boa d size. Six o he i m-speci ic con-
ols include in es men (CAPEX = he a io o annual
capi al expendi u e o he book alue o o al asse s), ma -
ke pe o mance (Q = Tobin’s q a io), i m size (SIZE = na -
u al loga i hm o o al annual e enue), p o i abili y
(ROA = he a io o ea nings be o e in e es paymen s and
income axes o o al asse s), le e age (LEVERAGE = o al
liabili ies o e o al asse s a io), and isk (RISK = he
annualized s anda d de ia ion o he i m’s daily s ock
ma ke e u ns o e a 1-yea pe iod). Table 1 p esen s he
de ini ions o all a iables used in his s udy.
Desc ip i e s a is ics and co ela ions
The desc ip i e s a is ics o he a iables a e gi en in Table
2 and Spea man’s ank co ela ions a e gi en in Table 3.
The mean annual o al compensa ion o CEO is A$
1,410,037, clea ly abo e i s median alue o A$ 714,384 due
o ex eme alues, and hence, we ake Napie ian loga i hm
o he CEO’s o al pay in ou mul i a ia e analysis. This
mean alue o CEO o al pay is g ea e han he mean o al
pay o A$ 988,824.2 in Fe nández-Méndez e al. (2015) as
hei amoun is exp essed in 2001 cons an dolla s and hei
pe iod o s udy ends in 2011.3 App oxima ely 63% o he
CEO o al pay is paid in he o m o ixed sala y which is
compa able o he 60% sala y pay in Schul z e al. (2013). As
o he es o pay componen s, 11.5% o CEO pay is bonus,
15.5% equi y, and op ions wi h a combined 27% o a iable
pay.4 An a e age CEO e ains 53.71% o he o al emune a-
ion paid join ly o he CEO and he op paid non-CEO exec-
u i e. This alue indica es ha on a e age he CEO is paid
16% mo e han he nex execu i e. On a e age, 27% o ou
sample i ms a e amily con olled. This alue is highe han
he same epo ed by Saleh e al. (2017), which is 22.45% o
1998–2007 pe iod and 24.54% o 2008–2010 pe iod. This
small di e ence migh be a ibu able o di e ences on he
sample size: 677 ASX i ms in hei case and 1,139 in ou s.
In ela ion o he gene a ion in con ol, 68% o he amily
i ms in ou sample a e in second gene a ion o beyond and
72% a e un by amily CEOs.
As o con ol a iables, he mean o boa d size is 6
akin o he 5.96 alue epo ed by Fe nández-Méndez e al.
(2015). The a e age p opo ion o independen di ec o s is
52% indica ing ha he ypical boa d o di ec o s is domi-
na ed by independen di ec o s. To conse e space, we
omi discussion o he desc ip i e s a is ics o ou emain-
ing con ol a iables.
The las column in Table 2 displays he a iance
in la ion ac o s (VIFs). All he alues a e a below 10
(maximum VIF alue is 2.64) indica ing ha ou
Table 1. De ini ion o a iables.
Va iables De ini ions
TOTAL PAY Napie ian loga i hm o he CEO’s o al pay measu ed in AUD.
SALARY The a io o sala y o o al pay o CEO.
BONUS The a io o bonus o o al pay o CEO.
EQUITY OPTIONS The a io o equi y and op ion-based pay o o al pay o CEO.
VARIABLE PAY The a io o a iable pay o o al pay o CEO.
PAY SLICE The a io o CEO o al pay and he highes o al pay o he op non-CEO execu i es.
PAY GAP Di e ence be ween he Napie ian loga i hm o he CEO o al pay and Napie ian loga i hm o he highes
o al pay o non-CEO execu i e.
FAMILY A bina y a iable which equals one i he i m is classi ied as a amily con olled and ze o o he wise.
MULTI GEN Bina y a iable ha akes alue one i he i m is in second gene a ion o beyond ( i m’s age is abo e
30 yea s) and ze o o he wise.
CEOFAM A bina y a iable one is he i m’s CEO belongs o he amily in con ol and ze o o he wise.
BD SIZE Napie ian loga i hm o he numbe o boa d membe s.
BD INDEP P opo ion o boa d independen di ec o s.
CAPEX Ra io o annual capi al expendi u e o he book alue o o al asse s.
Q Ra io o ma ke capi aliza ion o book alue o equi y.
SIZE Napie ian loga i hm o he i m’s book alue o o al e enue.
ROA The a io o EBIT o o al asse s.
LEVERAGE The a io o book alue o o al liabili ies o o al asse s.
RISK Annualized o daily ma ke e u n ola ili y.
430 Business Resea ch Qua e ly 27(4)
es ima ions do no p esen mul icollinea i y issues (Hai
e al., 1995).
Con a ily o ou expec a ions, we obse e in Table 3 a
signi ican posi i e co ela ion be ween amily con ol and
bo h CEO o al pay and he bonus pay. We also obse e a
nega i e co ela ion be ween amily con ol and he weigh
o equi y and op ion-based pay, and bo h o ou p oxies o
CEO pay dispa i y. The se o co ela ion coe icien s o
ou indica o o amily- ied CEO indica es ha CEOs
belonging o he con ol amily ecei es lowe compensa-
ion basically wi h less equi y based and a iable compo-
nen s and p esen s lowe pay dispa i y wi h o he
execu i es. All hese esul s a e in line wi h he p edic ions
o he BAM and he eluc ance o use o ms o compensa-
ion ha inc ease he CEO’s isk exposu e o he i m’s
a ai s. The posi i e co ela ions o he mul i-gene a ional
i m indica o wi h he o al compensa ion, he a iable
componen s, and pay dispa i y indica e ha he succession
o amily gene a ions e odes he execu i es’ ies wi h he
amily i m and educes hei incen i es o ac as
s ewa ds.
Empi ical me hod and esul s
Empi ical me hodology
The ollowing eg ession equa ion is used o es ou
hypo heses on he e ec o amily con ol on CEO pay, i s
s uc u e, and pay dispa i y in ela ion o o he op
execu i es
TOTAL PAY SALARY BONUSEQUITY OPTIONS
VARIABLEPAY PAY SLICE PAYGAP
ji
i
ii
FAMILYMULTI GENCEOFAM
CONTROLS
11
1
8
(|
||
)
()
,
,
1
1
2004 2018
1
12
k
kk
i
YEAR INDUSTRY
() ()
,
(1)
whe e subsc ip i deno es indi idual i ms and subsc ip
ep esen s he ime pe iod ( = 2004, 2005, . . ., 2018). The
coe icien s
α, β, μ, ω,
and
ψ
a e he pa ame e s o be es i-
ma ed, while
ε
is a dis u bance e m. Ou key p oxies o
amily con ol and i s speci ic ea u es a e FAMILY,
MULTI GEN, and CEO FAM which a e indica o s o am-
ily con ol, mul i-gene a ional i m, and CEO a ilia ion o
he amily. CONTROLS comp ise a o al o eigh a ia-
bles, as discussed in Sec ion “Measu emen o a iables.”
In addi ion, yea dummies (YEAR) and wo-digi GICS
indus y dummies (INDUSTRY) a e used o con ol o
ime ixed-e ec s and indus y ixed-e ec s, espec i ely.
We ha e es ima ed pooled OLS obus linea eg essions
wi h Whi e-co ec ed s anda d e o s in he p esence o
he e oscedas ici y.5 We ha e used p opensi y sco e ma ch-
ing (PSM) and eg essions on ma ched samples o alle ia e
endogenei y conce ns. We also es he e ec o amily
gene a ional s age (H2a, H2b, and H2c) and CEO amily
ies (H3a, H3b, and H3c) using Heckman (1979) wo-s age
Table 2. Desc ip i e s a is ics.
Va iable Obs. F equencies MMedian SD Minimum Maximum VIF
TOTAL PAY (A$) 4,581 1,410,037 714,384 1,748,481 18,500 8,126,175
SALARY 4,481 0.627 0.626 0.235 0.101 1.000
BONUS 4,581 0.115 0.036 0.142 0.000 0.528
EQUITY OPTIONS 4,581 0.155 0.074 0.196 –0.054 0.820
VARIABLE PAY 4,581 0.271 0.246 0.247 –0.019 0.868
PAY SLICE 3,767 2.004 1.746 1.374 0.194 11.520
PAY GAP 3,767 0.280 0.000 0.449 0.000 1.000
FAMILY 4,581 27.2% – – – – – 1.06
MULTI GEN 1,282 68.6% – – – – – 1.12
CEOFAM 1,282 72.2% – – – – – 1.15
BD SIZE 4,581 6.641 6.000 2.411 3 21 1.64
BD INDEP 4,581 0.527 0.5 0.258 0.071 1 1.21
CAPEX 4,581 –0.119 –0.044 0.219 –1.889 0 1.21
Q 4,581 6.362 1.526 26.054 –2.127 302.983 1.26
SIZE 4,581 4.573 4.602 2.596 –4.231 10.302 2.64
ROA 4,581 –0.069 0.041 0.479 –6.233 0.440 1.5
LEVERAGE 4,581 0.146 0.118 0.106 0.017 0.819 1.01
RISK 4,581 0.627 0.626 0.235 0.101 1.000 1.36
This able p esen s he dis ibu ion o a iables o he pe iod be ween 2004 and 2018 by showing he numbe o obse a ions, mean, median,
s anda d de ia ion, minimum, maximum, and he coe icien s associa ed wi h he VIF. De ini ions o he a iables shown a e displayed in Table 1. All
a iables coincide wi h de ini ions in Table 1 excep o TOTAL PAY and BD SIZE which o he sake o cla i y a e no log- ans o med.
Fe nández Méndez e al. 437
socioemo ional weal h which is he p ima y mo i a ion
o amily con ol g oups acco ding o BAM (Gómez-
Mejía e al., 2007). An inapp op ia e execu i e pay
design can lead o undesi ed choices o isk le el wi h
ca as ophic esul s o socioemo ional weal h losses
linked o he i m’s ailu e o he inabili y o e ain con-
ol (Be one e al., 2012). Family con ol g oups a e
especially ulne able o he isks de i ed om an inade-
qua e incen i e pay design (Gómez-Mejía e al., 2019).
High exposu e o isk p omo es moni o ing by he amily
g oup, con ibu ing o educe excessi e pay le els and
he need o a iable incen i es.
Ne e heless, socioemo ional ac o s a ec ing amily
decision-making a y wi h he age o he company (Sciascia
Table 9. Heckman eg ession esul s.
FAMILY
Panel A: Fi s -s age eg ession
FIRM AGE 0.0755*** (2.81)
HERF IND 0.6822*** (4.20)
CONTROLS YES
N4,225
Chi-squa e 397.29
p- alue .0000
Va iable TOTAL
PAY
SALARY BONUS EQUITY
OPTIONS
VARIABLE
PAY
PAY SLICE PAY GAP
Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7
Panel B: The e ec o amily gene a ional s age
Main
MULT–GEN 0.2826*** –0.0358*** 0.0093 0.0263*** 0.0324** 0.3299*** 0.2495***
(7.53) (–2.87) (1.00) (2.63) (2.49) (4.41) (6.77)
CONTROLS YES YES YES YES YES YES YES
YEAR-FE YES YES YES YES YES YES YES
INDUSTRY-FE YES YES YES YES YES YES YES
N_Uncenso e d 1,224 1,224 1,224 1,224 1,224 1,081 1,081
Wald chi-squa e 2,132.2 320.0 209.7 304.3 474.7 120.3 161.2
p- alue .0000 .0000 .0000 .0000 .0000 .0000 .0000
Mills a io: λ0.5720* 0.0475 –0.0547 0.0061 –0.0257 –0.5097 –0.0232
p- alue (1.93) (0.47) (–0.78) (0.08) (–0.26) (–0.77) (–0.07)
Panel C: The e ec o CEO amily a ilia ion on CEO pay
Main
CEOFAM –0.0828** 0.0820*** –0.0220** –0.0625*** –0.0846*** –0.2489*** –0.1748***
(–2.05) (6.17) (–2.22) (–5.92) (–6.17) (–3.14) (–4.43)
CONTROLS YES YES YES YES YES YES YES
YEAR-FE YES YES YES YES YES YES YES
INDUSTRY-FE YES YES YES YES YES YES YES
N_Uncenso e d 1,224 1,224 1,224 1,224 1,224 1,081 1,081
Wald chi-squa e 2,454.3 353.3 213.0 338.9 516.0 100.5 116.6
p- alue .0000 .0000 .0000 .0000 .0000 .0000 .0000
Mills a io: λ–0.0523 0.0693 –0.0608 –0.0110 –0.0409 –1.2436* –0.5908*
p- alue (–0.19) (0.72) (–0.91) (–0.16) (–0.45) (–1.80) (–1.73)
This able p esen s he Heckman (1979) es ima es o equa ion (1) p edic ing CEO pay size, CEO pay composi ion, and CEO pay dispa i y. Panel
A shows he i s -s age es ima ions o he p obi model p edic ing amily i m s a us (FAMILY) while Panels B and C p esen , espec i ely, he
ea men models p edic ing he e ec s o amily gene a ional s age (MULT-GEN) and CEO amily ies (CEOFAM). Dependen and con ol a iables
a e he same as in Table 4. De ini ions o he a iables shown a e displayed in Table 1. Second-s age models include wo-digi GICS and yea
dummy a iables. The ins umen s o he amily i m dummy in he i s -s ep es ima ion a e indus y-le el compe i ion p oxied by he He indahl
index a he wo-digi GICS indus y (HERF IND) and i m’s age (FIRM AGE). Fi s -s age eg essions include all he con ol a iables ha en e he
second s age, excluding yea dummies ha pe ec ly p edic amily i ms. Le els o signi icance a e indica ed by *, **, and *** o 10%, 5%, and 1%,
espec i ely. The p esence o he selec ion bias is cap u ed by he coe icien λ o he in e se o Mills a io. Typically, i λ is s a is ically equal o
ze o, hen he e is no issue o sample selec ion. In con a y, i λ is s a is ically di e en om ze o, hen he e is a sample selec ion issue and he
baseline es ima es a e biased. We signal in bold s a is ically signi ican coe icien s a o dina y le els.
438 Business Resea ch Qua e ly 27(4)
e al., 2014). The weigh o non- inancial goals o amily
membe s declines wi h he passing o gene a ions while
inancial goals inc ease as amily ies weaken and di e -
ences among new amily b anches eme ge (A ondo-Ga cía
e al., 2016; Le B e on-Mille & Mille , 2013; Luba kin
e al., 2005). Ou esul s indica e ha as amily con ol is
dilu ed h ough he eme gence o di e en amily b anches,
amily i ms beha e mo e like non- amily i ms, ha is,
paying highe and mo e a iable CEO compensa ion.
The lowe pay size, a iable pay, and pay dispa i y
associa ed wi h CEO amily ies a e consis en wi h he
no ion ha amily CEOs a e na u ally aligned wi h he
in e es s o he amily g oup, which educes he need o
supe ision o incen i e use. Family CEOs bene i om
he ul illmen o amily- ela ed socioemo ional goals and
a e p one o p esen al uis ic beha io s ha a e aligned
wi h he amily goals.
Theo e ical implica ions/con ibu ions
This esea ch con ibu es o he li e a u e on amily i ms
by o e ing e idence ha helps unde s anding he design
o CEO compensa ion in he e ogeneous amily i ms. We
espond o he calls o deepe esea ch on addi ional ele-
men s o amily in luence such as he gene a ion in con ol
and CEO amily ies (Alessand i e al., 2018). Fi s , in his
espec , we p esen esul s indica ing ha he amily i ms
con igu e execu i e pay acco ding o hei exposu e o
speci ic amily isk and i s e olu ion h ough ime and
gene a ions. Second, we obse e ha he di e en na u e
o isk bo ne by amily and non- amily execu i es is also a
key de e minan o he compensa ion o mulae chosen by
he i m.
Se e al au ho s ha e con ibu ed o his line o s udy by
analyzing how amily i m’s he e ogenei y a ec s di e se
manage ial ou comes. Fo ins ance, ecen s udies by
Sánchez-Ma ín e al. (2020) and Belda-Ruiz e al. (2021)
analyze he in luence o gene a ion in con ol and he CEO
amily ies on he di idend policy and he le el o CEO
compensa ion moni o ing, espec i ely. Mo e closely
linked o ou line o s udy, Michiels e al. (2013), using he
agency pe spec i e, analyze he in luence o hese same
aspec s on he pay-pe o mance a io while Ba on ini and
Bozzi (2018), om he s ewa dship heo y, analyze he
size o he di e en componen s o execu i e compensa-
ion. Ou a icle complemen s hese s udies by conside ing
a di e en heo e ical pe spec i e and ex ending he analy-
sis o he emune a ion o execu i es below he CEO le el
speci ically in compa ison wi h CEO pay.
Ou s udy belongs o he s eam o he academic li e a-
u e ha analyzes he in luence o amily con ol on execu-
i e pay, which depa ing om a pu ely agency pe spec i e
has e ol ed owa d socio-psychological pe spec i es
(Jaskiewicz & Dye , 2017). By using he BAM pe spec i e
h ough he lens o he SEW, we a e able o explain how
he changing non-economic aims and a ec i e bonds o
amily membe s con ibu e o he shaping o execu i e
pay.
Ou esul s o e suppo o BAM’s p edic i e alidi y
wi h espec o execu i e compensa ion design in he spe-
ci ic case o amily i ms. Combining BAM wi h amily
i m li e a u e, we ad ance ou knowledge o he speci ic
na u e o agency ela ions wi hin amily i ms. Ou esul s
a e in acco dance wi h he BAM’s assump ion ha he
beha io o all pa s implica ed in he i m’s managemen
and con ol a e d i en by loss a e sion and ha amily
g oups a e especially mo i a ed by a e sion o he loss o
socioemo ional weal h. While al e na i e app oaches such
as he agency heo y o he s ewa dship heo y do no
explain consis en ly he di e ences in he size and design
Table 10. Resul s al e na i e cu o poin o mul i-gene a ional i ms (25 yea s).
(1) (2) (3) (4) (5) (6) (7)
TOTAL PAY SALARY BONUS EQUITY
OPTIONS
VARIABLE
PAY
PAY SLICE PAY GAP
MULTI GEN 0.1660*** 0.0006 0.0253* –0.0165 0.0080 0.2370** 0.0540
(3.16) (0.03) (1.94) (–1.10) (0.43) (2.23) (1.02)
CONTROLS YES YES YES YES YES YES YES
YEAR-FE YES YES YES YES YES YES YES
INDUSTRY-FE YES YES YES YES YES YES YES
To al obs. 1,281 1,281 1,281 1,281 1,281 1,133 1,133
N i ms 130 130 130 130 130 126 126
Adjus ed R2.702 .200 .170 .191 .281 .0647 .100
F-s a is ics 76.37 8.856 7.565 8.578 13.49 2.957 4.152
p- alue .0000 .0000 .0000 .0000 .0000 .0000 .0000
Reg ession esul s o CEO pay on amily i m gene a ional s age. This able p esen s he pooled-OLS es ima es o Eq. (1) p edic ing CEO pay size,
CEO pay composi ion and CEO pay dispa i y using an unbalanced panel o i m-le el da a o he pe iod be ween 2004–2018. Dependen and
con ol a iables a e he same as in Table 4. De ini ions o he a iables shown a e displayed in Table 1. All models include 2-digi GICS and yea
dummy a iables. Le els o signi icance a e indica ed by *, **, and *** o 10%, 5%, and 1%, espec i ely. We signal in bold s a is ically signi ican
coe icien s a o dina y le els.
Fe nández Méndez e al. 439
o manage ial pay obse ed be ween ounde -con olled
and descendan -con olled i ms and be ween i ms un by
amily and non- amily CEOs, he BAM pe spec i e,
h ough he conside a ion o he e olu ion o socioemo-
ional goals pu sued by amily membe s, p o ides a alid
explana ion o he dynamics obse ed in he execu i e pay
policies o amily i ms.
P ac ical implica ions
Ou indings ha e se e al p ac ical implica ions o egu-
la o s, p ac i ione s, and amily owne s. Fi s , we ob ain
e idence ha migh be use ul in he o mula ion o he ec-
ommenda ions on execu i e compensa ion by policymak-
e s, by signaling ha a he han using a “one-size i s all”
ecipe, compensa ion o mulas should be adap ed o he
owne ship and con ol s uc u es o he companies. The
ASX makes a gene al ecommenda ion o include an
app op ia e balance o ixed and pe o mance-based emu-
ne a ion wi h a ge s aligned o he i m’s ci cums ances in
ela ion o goals and isk appe i e. Ou esul s con ibu e o
cla i y execu i e pay design conside ing he objec i es
and isk exposu e o owne s and agen s in amily i ms.
The e idence sugges s ha execu i e pay design in amily
i ms in gene al and mo e speci ically hose managed by
amily CEOs should no ely hea ily on he use o con in-
gen pay due o he exis ence o a s ong moni o ing by he
amily g oup and a na u al alignmen o he manage s wi h
he amily owne s’ goals. As amily owne ship is p edomi-
nan in mos o he coun ies, we encou age policymake s
o be awa e o he con lic s o in e es among amily mem-
be s ha may a ise om he use o a iable compensa ion
o mulas, especially hose ha a ec he i m’s owne ship
s uc u e.
Second, ou esul s p o ide aluable insigh s o in es-
o s. A be e knowledge o he amily i ms’ ea u es will
acili a e an accu a e assessmen o he compensa ion
packages p oposed in hese i ms. Family i ms’ non-
inancial objec i es and hei a e sion o he loss o soci-
oemo ional weal h a e speci ic cha ac e is ics ha a ec
he need o use a iable emune a ion o mulas o mana-
ge ial con ol. The e o e, he in es o s should be awa e
ha emune a ion o mulas conside ed unsui able o non-
amily i ms wi h dispe sed owne ship migh pe ec ly sui
amily i ms. Thus, he inancial ma ke s should no penal-
ize he p edominance o ixed compensa ion componen s
in amily i ms because o hei high le el o manage ial
moni o ing and in e es s’ alignmen . Mo eo e , wi hin he
cu en end o submi ing execu i e compensa ion plans
o sha eholde o es (say on pay), i is c ucial ha he o -
e s a e awa e o how he alue c ea ion po en ial o com-
pensa ion o mulae migh depend on he owne ship and
con ol s uc u es o he i m.
Finally, amily i ms’ leade s and owne s should p o-
mo e app op ia e compensa ion packages. The esul s o
ou esea ch ad ise amily i ms o adap hei compensa-
ion o mulae o he e olu ion o he con ol s uc u e o
he i m. By conside ing he he e ogenei y o amily i ms
de i ed om hei gene a ional s age and he hi ing o
non- amily manage s, we can explain wi hin he BAM’s
amewo k he mul iple aces o he in luence o amily
con ol on execu i e’s pay design. We see he gene a ional
change and he p o essionaliza ion o amily i ms’ man-
agemen a e ac o s ha shape amily con ol and conse-
quen ly should be conside ed in he design o execu i e’s
pay.
Limi a ions
We acknowledge se e al limi a ions in he s udy ha mod-
e a e he scope o ou esul s and indica e a hin abou pos-
sible lines o u u e esea ch. The in insic di icul y in
building a mul i-coun y amily i m da abase unde a sin-
gle se o classi ica ion c i e ia make us o ocus ou a en-
ion on a single coun y. We ha e chosen Aus alia since
his ma ke has p esen ed a pe iod o economic g ow h and
s abili y despi e he ecession pe iods de i ed om he
global inancial c isis expe ienced in mos o he de el-
oped coun ies. The e o e, ou esul s a e no a ec ed by
his ex e nal shock, bu migh be di icul o ex apola e o
o he ma ke s wi h di e en egula ions and en ep eneu -
ial cul u e.
A second limi a ion esides in he ac ha we only use
quan i a i e da a in ou analysis. A quali a i e app oach
migh p o ide in e es ing insigh s abou he amily dynam-
ics and he impo ance o non- inancial goals pu sued by
amily membe s. The conside a ion o hese quali a i e
aspec s migh allow o gain a deepe knowledge o he he -
e ogenei y among amily i ms and i s in luence on he
design o execu i e compensa ion.
Fu u e lines o s udy
I is wo h o men ion ha ou esea ch ocus on a sam-
ple lis ed i ms ha a e subjec ed o he p o isions o
he ASX codes o good go e nance p esc ibing he issu-
ance o anspa en and accu a e in o ma ion on execu-
i e compensa ion. The di e ences in he le el o public
sc u iny on execu i e compensa ion be ween public and
p i a e i ms migh cause ma ked dissimila i ies in he
design o CEO pay as he la e end o use less sophis-
ica ed CEO compensa ion plans (Bebchuk & F ied,
2003; Bi le e al., 2005). The e o e, i would be o he
upmos in e es o s udy he e ec o amily i m con ol
and he e ogenei y on execu i e pay design in p i a e
i ms, which cons i u e he majo i y o companies in
mos coun ies (Lisowsky & Minnis, 2020; Qian e al.,
2018).
I also esul s o g ea impo ance he conside a ion o
cul u al legacy and ins i u ional aspec s ha migh a ec
440 Business Resea ch Qua e ly 27(4)
he dynamics wi hin he amily g oup. The e y concep
o amily and he a i udes owa d isk o ailu e and com-
pensa ion a e in ima ely linked o adi ion. Fo ins ance,
he managemen o amily a ai s migh be a ec ed by he
size o he amily g oup, wi h ex ended amily g oups
being he no m in ce ain e i o ies and he nuclea amily
g oup in o he s. The use o a mul i-coun y amewo k
migh allow o ake accoun o hese en i onmen al ac-
o s (e.g., cul u e, eligiosi y, poli ical isk, economic
de elopmen ) ha can in luence he amily a i udes
owa d isk- aking and he e o e he design o execu i e
pay packages.
Decla a ion o con lic ing in e es s
The au ho (s) decla ed no po en ial con lic s o in e es wi h
espec o he esea ch, au ho ship, and/o publica ion o his
a icle.
Funding
The au ho (s) disclosed eceip o he ollowing inancial suppo
o he esea ch, au ho ship, and/o publica ion o his a icle:
This esea ch was suppo ed by Minis e io de Ciencia e
Inno ación unde p ojec PID2019-108503RB-I00.
ORCID iD
Ca los Fe nández Méndez h ps://o cid.o g/0000-0002-0266
-7066
No es
1. The a e age age o amily i m in Aus alia is 32 yea s
which is sligh ly abo e he 25–30 yea s span usually consid-
e ed o he ansi ion o a gene a ion.
2. We ha e selec ed he yea 2011 (middle yea o ou pe iod
o s udy) o he classi ica ion o companies in o he ca ego-
ies o amily and non- amily i ms, so as o minimize he
ime span o e which he owne ship s uc u e can e ol e
wi h espec o he yea o classi ica ion.
3. When we adjus ou CEO pay igu es based on 2001 con-
s an A$ o he pe iod ending in 2011, ou mean alue is
A$ 991,988 which is now compa able o he igu e in
Fe nández-Méndez e al. (2015).
4. The emainde 11% a e ixed non-sala y componen s.
5. The esul s emain when we use clus e ing by i m.
6. The numbe o obse a ions in Table 9 is 1,224 while in
Tables 5 and 6 hey amoun o 1,281. The eason o he loss
o hese 57 obse a ions is he exis ence o missing alues
due o he log ans o ma ion o he numbe o yea s since
he i m became publicly lis ed ( a iable used as an ins u-
men in he i s -s age p obi o he Heckman es ima ion).
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