Non-Family Board Compensation: Exploring Drivers and Effects of Family-Business Nexus

The unique characteristics differentiating board compensation structures for family directors and their non-family counterparts pose a distinctive governance challenge in family firms. However, the factors influencing non-family board compensation and its consequences remain largely overlooked. Thus, this paper scrutinizes the potential non-linear relationship between family board involvement and the compensation of non-family directors, incorporating the mixed gamble logic perspective. Additionally, the study seeks to unveil the effects of non-family board compensation on firm performance. Relying on a sample of Italian listed family firms during the period 2014-2018 and employing a dynamic panel generalized method of moment (GMM), the findings reveal a U-shaped relationship between family board involvement and non-family directors' compensation levels. Furthermore, the results prove that non-family directors’ compensation positively influences firm performance. Delving into this evidence, the research contributes to both theory and practice by shedding light on the complex dynamics of family boards, non-family board compensation strategies and their effect on performance.