Compensation policies in family and non-family SMEs: Survey evidence from Flanders

Abstract

This article discusses compensation policies in Flemish small- and medium-sized enterprises (SMEs). More specifically, the level and composition (proportion base salary, variable pay and non-monetary incentives) of a CEO's compensation package is investigated, as well as the use of formal compensation practices in Flemish SMEs. We analyse the adoption of seven 'best practices' with regard to formal compensation systems, such as: the presence of an HR manager, the presence of a written pay policy for managers and/or employees, the use of benchmarking, the discussion of pay issues in the board of directors and/or in family governance mechanisms (family charter, family forum) and the presence of a compensation committee. The results are based on survey data of over 200 Flemish SMEs. Throughout the paper, a comparison is made between family firms (which consist of 86% of our sample) and non-family firms (14% of our sample).