Executive compensation in family controlled private organisations

Abstract

According to agency theory, it is useful to tie executive remuneration to the performance of an executive. In family organisations, there exist other agency problems. Therefore, it is meaningful to do research on executive pay in these companies. The study of literature describes agency theory in general and in family organisations. Then, mechanisms to control agency problems are proposed. Here, the focus lies on incentives because the influence of performance on executive remuneration is studied. Our research includes other variables that should have an influence on executive remuneration and moderating variables as well. We found an answer on the question which compensation is most frequently used in family organisations by using literature. Data analysis is performed on a database of 2003 of US private family organisations that are owner managed. Regression analysis is performed. The results of our analyses state that executive pay is never influenced by performance. The moderating