Family ownership, corporate governance, and top executive compensation

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Managerial and Decision Economics, ISSN: 0143-6570, Vol: 27, Issue: 7, Page: 549-561

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CHENG, Lai Sheung, Suwina; FIRTH, Michael
Wiley-Blackwell; John Wiley & Sons, Ltd.
Business, Management and Accounting; Decision Sciences; Accounting
article description
In this study we investigate how top management pay is determined in a family firm environment where even listed firms are effectively controlled by a single individual or a single family. Using data from Hong Kong, we find that executive directors' pay is reduced if the directors have substantial stockholdings. Moreover, pay is related to profits but not to stock returns. Our results are consistent with external blockholders and independent non-executive directors persuading firms to base top management compensation on a firm's profitability. Copyright © 2006 John Wiley & Sons, Ltd.