Corporate dynasties: The curious case of family CEOs

by Cameron Edmond28 Jan 2014
Despite dissatisfaction with monarchies, many individuals are still content with the corporate world being ruled by families. Many large organisations feature ‘family CEOs’, or otherwise remain in the hands of the founder’s family through board members and executives: confectionary brand Mars, media juggernaut News Corp, and Ford Motor Co, for instance.*

However, research from Harvard Business School, the London School of Economics and Columbia University has found that family CEOs are often less hard working than ‘professional CEOs’.

"On the one hand, it stands to reason that they should be super-motivated to work hard because whatever they do for the company adds to the wealth of their whole family," Raffaella Sadun, co-author of the study, told Harvard Business School Working Knowledge.

 "On the other hand, a CEO's incentive to perform is in large part tied to what happens when he or she does not perform—a risk of getting ousted."

The study surveyed around 356 CEOs in India, two-thirds being members of the family that owned the firm. The study went on for three months, with researches collecting time-use information from either the CEO themselves or their PA.

The study found that family CEOs lodged fewer hours than professional CEOs. However, second-plus generation CEOs (those who inherited the role, as opposed to founding the company), were found to work more hours than founder-CEOs.

While it may appear odd to base the study on hours worked, the analysis revealed that a 1% increase in weekly hours worked was associated with a 1.04% increase in firm productivity annually, and a 0.1% increase in sales growth over a five-year period.

The study was then replicated across Brazil, France, Germany, the UK and the US and found similar results.

Sadun feels that the research indicates family CEOs have a nonmonetary motivation for running their companies.

"It's clearly not just about maximising profits. It's not just about how much they're paid. And we just need to understand what's going on, what the motivation is. Because we know that if we could target these groups of firms and improve their performance, there would be very important implications for business research and, most importantly, the economy."

What do you think of these findings? Are their pros to family CEOs, and what do you think their motivations are?

*Source: Business Insider.
 
 

COMMENTS

  • by Harley 28/01/2014 3:31:24 PM

    It would make sense that such family CEOs would also take a longer view of the buisness as well. Given that they had grown up with the buisness they may also know more about it than a genetic CEO.

  • by Michelle Bishop 1/08/2014 9:11:55 PM

    Thank you for this very interesting article, it would be very interesting to see what the impacts of the family CEO had on the motivation of staff and the effect on workplace culture.

Most Read