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Compensation and Rewards

A Family firm CEO’s perspective

Written by S. Boström, E. Lund

Paper category

Master Thesis


Business Administration>General




Master Thesis: Family business studies Family business is conducted in different environments, such as company types, countries, and governance systems, which explains the diversity of family business definitions in the literature (Miller, Le Breton-Miller, Lester & Cannella, 2007). A common view is that an organization is mostly “controlled and managed by several family representatives” (Shanker & Astrachan, 1996). Generally speaking, “transfer through multi-generational families” (Anderson & Reeb, 2003; Gomez-Mejia et al., 2011). In the study of Villonga and Admit (2006), the family business with the largest proportion of companies that can define itself as a family business is defined as "one or more family members are senior staff, directors or major shareholders" (Villonga & Admit, 2006. p 413. This is one of the selected definitions to be used in this study. In addition, Bjuggren, Nordström, and Palmberg (2018) use another definition of family business and refer to Chua, Chrisman, and Sharma (1999). In Chua In the study of et al. (1999), they used the definition as “family business is to shape and pursue the corporate vision held by the dominant alliance controlled by the same family or a small number of family members for governance and/or Managed enterprises. In a way that is potentially sustainable between the family or generations of the family" (Chua et al., 1999 p.25). Bjuggren et al. (2018) believe in their research that Their definition of a family business is “a business that regards itself as a family business.” They assume that these companies intend to take control of the company in the hands of the family, which will help the company realize the definition of a family business proposed by Chua et al. ( 1999) (Bjuggren et al., 2018). The definition of Bjuggren et al. (2018) is the second definition that will be used in this study. Chapter 3 will provide more information about the selected definition. Family business is due to its Unique characteristics are different from other business forms (Kraiczy et al., 2014). Therefore, the next section of this chapter will outline the characteristics of family businesses. 2.2 Family business characteristics Nordqvist et al. (2009) emphasizes the complexity and specific characteristics of family businesses. One of the important factors that distinguish family businesses from other business forms is family involvement (Chua et al., 1999). Family business owners often supervise the company as CEO and make a major part of decision-making (Family Business Network, 2020). ), which is very common. In addition, control, inheritance, and structure are important components that a family business needs to deal with to ensure continuity (Brenes, Madrigal, and Molina-Navarro, 2006). 2.2.1 Goals of the family business The family business has non-financial and financial goals (Aparicio, Basco, Iturralde & Maseda, 2017; Astrachan & Jaskiewicz, 2008; Williams, Pieper, Kellermanns & Astrachan, 2018; Zellweger, etc., 2013). Although non-financial goals are recognized in companies, they are particularly prominent in family businesses (Zellweger et al., 2013). According to Zellweger et al. (2013), non-financial goals can be described as goals that "...have no direct tangible monetary value" (Zellweger et al., 2013, p. 232). These non-financial goals can be associated with businesses, families, or owners (Astrachan & Jaskiewicz 2008). For example, the ability to provide customers with high-quality services and products (Abdel-Maksoud, Dugdale & Luther, 2005; Khatri & Ng, 2000), having family members as employees, and family harmony (Aparicio et al., 2017; Chrisman, Chua, Pearson & Barnett, 2012; Chrisman, Chua & Zahra, 2003), positive public image or reputation (Khatri & Ng, 2000). In addition, non-financial goals may also involve the environment, corporate social responsibility, employee practices, and relationships with customers and suppliers (Gómez-Mejía et al., 2007; Zellweger & Nason, 2008). On the other hand, financial goals are measures such as dividends, profit/sales, increase in market share, and ROA and ROI (Aparicio et al., 2017). The next section introduces the characteristics of family business CEOs. 2.3 CEO of a family company CEO is the "face" of the company in the eyes of the public and plays a key role. They help the company define its image for external and internal stakeholders. For example, through managing culture, communicating vision, collective goals and creating adaptability (Park & ​​Berger, 2004; Resick et al., 2009). In addition, the CEO has the ability to make decisions and influence the company's strategic direction (Busenbark, Krause, Boivie & Graffin 2016). According to the literature, the motivations of family CEOs in family businesses are related to SEW and non-financial goals. In addition, they focus on non-financial aspects such as ownership, reputation, and harmony within the family (Gomez-Mejia et al., 2007; Gomez-Mejia et al., 2011). Unlike family CEOs, family companies can also have non-family CEOs (Waldkirch, 2020). Klein and Bell (2007) refer to another article and explain that non-family CEOs are; "... are not blood relatives, nor are they related to owning a family through marriage or adoption" (Klein & Bell, 2007, p. 20 ). Family businesses may choose to hire non-family CEOs to acquire skills or high professionalism that do not exist within the family (Stewart & Hitt, 2012). Non-family CEOs are the basic role in the family business that creates growth and can compete in the business environment (Blumentritt, Keyt & Astrachan, 2007; Chua, Chrisman & Sharma, 2003) because they can contribute their skills and ideas (Chua et al. , 2003). Read Less