The impact of family control on the use of performance measures in strategic target setting and incentive compensation: A research note

This paper deals with the impact of a firm's governance structure on its management control system (MCS). We argue that the involvement of founding family members in the top management team (TMT) as a corporate governance characteristic has an impact on how the TMT exercises control over subordinates. Based on a sample of 304 mainly small and medium-sized firms, our paper provides empirical evidence that founding family involvement in the TMT is associated with the latter making less use of performance measures in its strategic target setting and incentive practices, and that this impact of family involvement is moderated by firm size.

► The paper shows that a firm's governance structure has an impact on its management control system (MCS). ► We argue that the involvement of founding family members in the top management team (TMT) has an impact on how the TMT exercises control over subordinate managers and employees. ► We provide empirical evidence based on a sample of 304 mainly small and medium-sized family firms. ► Our data indicates that founding family involvement in the TMT is associated with the latter making less use of performance measures in its strategic target setting and incentive practices. ► This impact of family involvement is moderated by firm size.