Voluntary Disclosure of Individual Outside Director Compensation in Public Family Firms

Abstract

As minority shareholders have only limited options to guard their investment against opportunistic behavior of a dominant family owner, outside directors take a central role in corporate governance. The decision to voluntarily disclose their individual compensation induces confidence in the family firm's governance system but also contradicts a family's endeavors to keep exclusive control. Using the socioemotional wealth based FIBER model, we investigate family influence on a firm's voluntary disclosure decision while distinguishing between different types of family firms. Our findings show that control enhancing aspects, such as a family CEO and a high ownership concentration are required for owning family's to exert influence and that the preferred outcome of a disclosure decision varies strongly contingent upon the type of family firm.

This chapter is based on an unpublished working paper written by Pascal Engel in collaboration with Prof. Dr. Andreas Hack and Prof. Franz W. Kellermanns, Ph.D.