Shareholder activism in listed family firms: Exploring the effectiveness of say‐on‐pay on CEO compensation

Abstract

The widespread critical evidence surrounding executive compensation of listed corporations has boosted shareholder activism in recent decades. The say‐on‐pay (SOP) mechanism—a vote in which shareholders express their (dis)agreement with executive pay designs—is one of the corporate governance mechanisms that has led to this activism among listed firms. Merging agency and socioemotional wealth (SEW) arguments, this paper analyzes how effective SOP voting results are among listed family firms in terms of CEO compensation efficiency and equity. Using a sample of UK listed firms from 2011 to 2018, our results show that SOP effectiveness is positively influenced by family ownership and is strongly moderated by family involvement in management and in governance as well as by family generation. Our findings stress the strong family effect and the ethical perceptions of family shareholders on SOP voting, showing how family participation in the firm encourages fairer and more aligned CEO compensation packages. SOP institutional and practical implications oriented to preserve shareholder value and family wealth are finally outlined.

Linkages between high-performance work practices and family-centered goals: implications for financial performance in family firms

“…At this point, it is necessary to highlight that implementing HPWP may enhance financial performance and efficiency. Moreover, SEW preservation may be favored by improvements in business performance (Martin and Gomez-Mejia, 2016; Sánchez-Marín et al. , 2023).…”

“…At this point, it is necessary to highlight that implementing HPWP may enhance financial performance and efficiency. Moreover, SEW preservation may be favored by improvements in business performance (Martin and Gomez-Mejia, 2016;S anchez-Mar ın et al, 2023). The owning family emphasis on the long-term preservation of the business and its SEW might thus create compelling motivations for implementing HR policies aimed at attaining high performance.…”