Executive compensation in lone ownership and family firms: the total level of compensation and the way it is structured.

Abstract This thesis analyzes what kind of effects family and lone-ownership firms have on the level and structure of the executive officers compensation packages. In line with forecasts from existing theory, it is found that family and lone-ownership firms have a negative effect on the level of the compensation package for executive officers. There is not much proof found that family and lone-ownership firms have a significant effect on the structure of executive compensation packages for the executive officers. The only real significant proof, for a difference in the structure of payment, is found in the fact that executives in lone-founder firms seem to get more option grants than executives in other firm structures, including family firms. This thesis states that apparently the interests of the executive officer in a lone ownership firm is not as strongly aligned with the firms interests as is the case for an executive officer in a family firm. This may be because of lower levels of intrinsic motivation or non-financial goals, due to for example less social pressure, trust and control from the absence of family members. This shows that the results of this thesis have implications for family business research, executive compensation and especially lone-founder firm literature. Foreword Dear reader, before you dive in the actual work of this thesis I would like to make some remarks concerning the realization of this thesis. This thesis was based on two data sets, the first one was the Execucomp (Executive compensation) data set and the second one concerned the family firm data. Both data sets were placed at my disposal by my supervisor dr. J.H. Block, wherefore I am very grateful to him. Overall I experienced the entire collaboration with dr. Block as a very pleasant and constructive one. Thanks to positive comments and good leads from his side, the realization process of this thesis progressed prosperously. I also speak with special appreciation of the articles, ‘Are CEOs in Family Firms Paid Like Bureaucrats? Evidence from Bayesian and Frequentist Analyses.’ (Block, 2008) and ‘Executive compensation.’ (Murphy, 1999) , due to the fact that these articles gave me real inspiration for my thesis and increased my enthusiasm during the realization process. Of course not all things went smoothly, working with Stata was new to me and therefore also one of the main challenges, some time expired before I got used to the program. Another challenge for me was to keep a good overview on the entire thesis, sometimes I was so deep in a specific part that I lost the oversight. The main thing I learned from this entire process, was to keep a good overall picture and keep the structure of the thesis in mined. So the goal, answering the main question, is reached by going through certain regulated steps in a civil way. Many weeks of great effort are over now, but research on the fields of executive compensation, family and lone-ownership firms are not over. Especially not in these times of crises, were compensation contracts of executive officers are publicly discussed almost every day.