Remuneration for Employees in Family Businesses: A Regional Comparative Analysis of Spain and Mexico
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Dec 1, 2012
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Abstract
This article examines the remuneration for employees based in family businesses in two regions, Spain and Mexico, using the cultural differences between the two countries identified by Hofstede. The results obtained from the sample of 342 Spanish businesses and 280 Mexican businesses show that remuneration varies among types of family businesses and between countries. Such differences are explained through agency arguments (the composition of company management and interest shared between the owners and the employees) and through institutional arguments (cultural conditioners). More concretely, the authors found that, on one hand, the remuneration for employees based in family-owned and family-managed businesses is lower and less mobile than the remuneration for employees in family businesses that use professional managers. On the other hand, they found that Mexican employees receive lower fixed remunerations than Spanish employees do although the former receive higher variable remuneration percentages.
Keywords
family business employee remuneration, theoretical agency and institutional frameworks, Spanish and Mexican businesses, remuneration in family-owned and family-managed businesses, Mexican employees remuneration and Spanish employees remunerationretribuição de empregados na empresa familiar, entorno teórico de agência e institucional, empresas espanholas e mexicanas, retribuição em empresas de propriedade e direção familiar, retribuição empregados mexicanos e espanhóisretribución de empleados en empresa familiar, marcos teóricos de agencia e institucional, empresas españolas y mexicanas, retribución en empresas de propiedad y dirección familiar, retribución empleados mexicanos y españoles
References
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Barkema, H. G. and Gómez-Mejía, L. R. (1998). Managerial compensation and firm performance: a general research framework. Academy of Management Journal, 41 (2), 135-145.
Bolton, P. and Dewatripont, M. (2004). Contract theory. Cambridge: MIT Press.
Calvo, G. and Wellisz, S. (1978). Supervision, loss of control and the optimal size of the firm. Journal of Political Economy, 86, 943-952.
Carrasco-Hernández, A. and Sánchez-Marín, G. (2007). The determinants of employee compensation in family firms: Empirical evidence. Family Business Review, 20 (3), 215-228.
Chrisman, J.; Chua, J., and Litz, R. (2004). Comparing the agency costs of family and non-family firms: Conceptual issues and exploratory evidence. Entrepreneurship Theory and Practice, 28 (4), 335-354.
Chrisman, J.; Chua, J., and Steier, L. (2002). The influence of national culture and family involvement on entrepreneurial perceptions and performance at the state level. Entrepreneurship Theory and Practice, 26 (4), 113-130.
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Core, J.; Holthausen, R., and Larcker, D. (1999). Corporate governance, CEO compensation and firm performance. Journal of Financial Economics, 51(3), 371-406.
Debicki, B.; Matherne, C.; Kellermanns, F. and Chrisman, J. (2009). Family business research in the new Millennium: An overview of the who, the where, the what and the why. Family Business Review, 22, 151-166.
DiMaggio, P. J. and Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48, 147-160.
Eisenhardt, K. M. (1988). Agency and institutional theory explanations: The case of retail sales compensation. Academy of Management Journal, 31, 488-511.
Fama, E. F. and Jensen, M. L. (1983). Separation of ownership and control. Journal of Law and Economics, 26, 301-325.
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Gómez-Mejía, L. R. (1992). Structure and process of diversification, compensation strategy, and firm performance. Strategic Management Journal, 13, 381-397.
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Gómez-Mejía, L. R.; Núñez-Nickel, M., and Gutiérrez, I. (2001). The role of family ties in agency contracts. Academy of Management Journal, 44(1), 81-95.
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Itoh, H. (1991). Incentives to help in multi-agent situations. Econometrica, 59, 611-636.
Jensen, M. and Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305-360.
Miller, J.; Hom, P. and Gómez-Mejía, L. (2001). The high cost of low wages: Does maquiladora compensation reduce turnover? Journal of International Business Studies, 32 (3), 585-595.
Pennings, J. M. (1993). Executive reward systems: A cross-national comparison. Journal of Management Studies, 30, 261-280.
Ricart, J.; Álvarez, J. and Gallo, M. (1999). Governance mechanisms for effective leadership: The case of Spain. Corporate Governance, 7, 266-287.
Romero, M. G. and Valle, R. (2001): Strategy and manager's compensation: The Spanish case. International Journal of Human Resource Management, 12, 218-242.
Sánchez Marín, G. (2008). National differences in compensation: The influence of the institutional and cultural context. En L. R. Gómez-Mejía and S. Werner (Eds.), Global compensation: Foundations and perspectives (pp. 18-28). Abingdon, UK: Routhledge.
Schuler, R. S. and Rogovsky, N. (1998). Understanding compensation practice variations across firms: The impact of national culture. Journal of International Business Studies, 29, 159-177.
Schulze, W.; Lubatkin, M.; Dino, R. and Buchholtz, A. (2001). Agency relationships in family firms: Theory and evidence. Organization Science, 12 (2), 99-116.
Scott, W. R. (1987). The adolescence of institutional theory. Administrative Science Quarterly, 32, 493-511.
Tosi, H. L. and Greckhamer, T. (2004): Culture and CEO compensation. Organization Science, 15, 657-670.
Van den Berghe, L. and Carchon, S. (2003). Agency relations within the family business system: An exploratory approach. Corporate Governance, 11 (3), 155-285.
Van Steel, A. and Stunnenberg, V. (2006). Linking business ownership and perceived administrative complexity. Journal of Small Business and Enterprise Development, 13, 7-23.
Vilaseca, A. (2002). Conflict of interests and objectives between nonemployed shareholders and top management team. Family Business Review, 15 (5), 299-320.
Werner, S. and Tosi, H. (1995). Other people's money: Effects of ownership on compensation strategy and managerial pay. Academy of Management Journal, 38, 1672-1691.
Werner, S.; Tosi, H. and Gómez-Mejía, L. R. (2005). Organizational governance and employee pay: How ownership structure affects the firm's compensation strategy. Strategic Management Journal, 26, 377-384.
Westphal, J. D. and Zajac, E. J. (1994). Substance and symbolism in CEO's long-term incentive plans. Administrative Science Quarterly, 39, 367-390.
Anderson, R.; Mansi, S., and Reeb, D. (2002). Founding family ownership and the agency cost of debt. Journal of Financial Economics, 68, 263-285.
Arias-Galicia, L. F. (2005). Human resource management in México. En M.M. Elvira and A. Dávila (Eds.). Managing human resources in Latin America: An agenda for international leaders (pp. 179-190). London: Routledge.
Baker, G.; Jensen, M., and Murphy, K. (1988). Compensation and incentives: Practice vs. theory. Journal of Finance, 18 (3), 593-616.
Barkema, H. G. and Gómez-Mejía, L. R. (1998). Managerial compensation and firm performance: a general research framework. Academy of Management Journal, 41 (2), 135-145.
Bolton, P. and Dewatripont, M. (2004). Contract theory. Cambridge: MIT Press.
Calvo, G. and Wellisz, S. (1978). Supervision, loss of control and the optimal size of the firm. Journal of Political Economy, 86, 943-952.
Carrasco-Hernández, A. and Sánchez-Marín, G. (2007). The determinants of employee compensation in family firms: Empirical evidence. Family Business Review, 20 (3), 215-228.
Chrisman, J.; Chua, J., and Litz, R. (2004). Comparing the agency costs of family and non-family firms: Conceptual issues and exploratory evidence. Entrepreneurship Theory and Practice, 28 (4), 335-354.
Chrisman, J.; Chua, J., and Steier, L. (2002). The influence of national culture and family involvement on entrepreneurial perceptions and performance at the state level. Entrepreneurship Theory and Practice, 26 (4), 113-130.
Chua, J. H.; Chrisman, J. J., and Chang, E. (2004). Defining the family business behaviour. Entrepreneurship Theory and Practice, 23(4), 19-40.
Chua, J. H.; Chrisman, J. J., and Sharma, P. (1999). Are family firms born or made?: An exploratory investigation. Family Business Review, 17 (1), 37-54.
Core, J.; Holthausen, R., and Larcker, D. (1999). Corporate governance, CEO compensation and firm performance. Journal of Financial Economics, 51(3), 371-406.
Debicki, B.; Matherne, C.; Kellermanns, F. and Chrisman, J. (2009). Family business research in the new Millennium: An overview of the who, the where, the what and the why. Family Business Review, 22, 151-166.
DiMaggio, P. J. and Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48, 147-160.
Eisenhardt, K. M. (1988). Agency and institutional theory explanations: The case of retail sales compensation. Academy of Management Journal, 31, 488-511.
Fama, E. F. and Jensen, M. L. (1983). Separation of ownership and control. Journal of Law and Economics, 26, 301-325.
Gallo, M.; Tàpies, J., and Cappuyns, K. (2004). Comparison of family and nonfamily business. Family Business Review, 17 (4), 303-318.
Galve-Gorriz, C. y Salas-Fumás, V. (2003). La empresa familiar en España: Análisis económico y resultados. Madrid: Fundación BBVA.
Gómez-Mejía, L. R. (1992). Structure and process of diversification, compensation strategy, and firm performance. Strategic Management Journal, 13, 381-397.
Balkin, D. B. (1992). Compensation, organizational strategy, and firm performance. Cincinnati, OH: South-Western Publishing.
Gómez-Mejía, L. R.; Larraza, M., and Makri, M. (2003). The determinants of CEO compensation in family controlled public corporations. Academy of Management Journal, 46, 226-237.
Gómez-Mejía, L. R.; Núñez-Nickel, M., and Gutiérrez, I. (2001). The role of family ties in agency contracts. Academy of Management Journal, 44(1), 81-95.
Gomez-Mejia, L. R. and Welbourne, T. M. (1991). Compensation strategy in a global context. Human Resource Planning, 14 (1), 29-42.
González, M.; Guzmán, A.; Pombo, C. y Trujillo, M. (2010). Empresas familiares: revisión de la literatura desde una perspectiva de agencia. Cuadernos de Administración, 23 (40), 11-33.
Hofstede, G. (1980): Culture's consequences: International differences in work-related values. Newbury Park: Sage.
Cultures and organizations. (1991). London: McGraw-Hill.
Culture's consequences: comparing values, behaviors, institutions, and organizations across nations. (2001). Beverly Hills (CA): Sage.
Holmström, B. and Milgrom, P. (1990). Regulating trade among agents. Journal of Institutional and Theoretical Economics, 146 (1), 85-105.
Itoh, H. (1991). Incentives to help in multi-agent situations. Econometrica, 59, 611-636.
Jensen, M. and Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305-360.
Miller, J.; Hom, P. and Gómez-Mejía, L. (2001). The high cost of low wages: Does maquiladora compensation reduce turnover? Journal of International Business Studies, 32 (3), 585-595.
Pennings, J. M. (1993). Executive reward systems: A cross-national comparison. Journal of Management Studies, 30, 261-280.
Ricart, J.; Álvarez, J. and Gallo, M. (1999). Governance mechanisms for effective leadership: The case of Spain. Corporate Governance, 7, 266-287.
Romero, M. G. and Valle, R. (2001): Strategy and manager's compensation: The Spanish case. International Journal of Human Resource Management, 12, 218-242.
Sánchez Marín, G. (2008). National differences in compensation: The influence of the institutional and cultural context. En L. R. Gómez-Mejía and S. Werner (Eds.), Global compensation: Foundations and perspectives (pp. 18-28). Abingdon, UK: Routhledge.
Schuler, R. S. and Rogovsky, N. (1998). Understanding compensation practice variations across firms: The impact of national culture. Journal of International Business Studies, 29, 159-177.
Schulze, W.; Lubatkin, M.; Dino, R. and Buchholtz, A. (2001). Agency relationships in family firms: Theory and evidence. Organization Science, 12 (2), 99-116.
Scott, W. R. (1987). The adolescence of institutional theory. Administrative Science Quarterly, 32, 493-511.
Tosi, H. L. and Greckhamer, T. (2004): Culture and CEO compensation. Organization Science, 15, 657-670.
Van den Berghe, L. and Carchon, S. (2003). Agency relations within the family business system: An exploratory approach. Corporate Governance, 11 (3), 155-285.
Van Steel, A. and Stunnenberg, V. (2006). Linking business ownership and perceived administrative complexity. Journal of Small Business and Enterprise Development, 13, 7-23.
Vilaseca, A. (2002). Conflict of interests and objectives between nonemployed shareholders and top management team. Family Business Review, 15 (5), 299-320.
Werner, S. and Tosi, H. (1995). Other people's money: Effects of ownership on compensation strategy and managerial pay. Academy of Management Journal, 38, 1672-1691.
Werner, S.; Tosi, H. and Gómez-Mejía, L. R. (2005). Organizational governance and employee pay: How ownership structure affects the firm's compensation strategy. Strategic Management Journal, 26, 377-384.
Westphal, J. D. and Zajac, E. J. (1994). Substance and symbolism in CEO's long-term incentive plans. Administrative Science Quarterly, 39, 367-390.
How to Cite
Sánchez Marín, G., Carrasco Hernández, A. J., & Madero Gómez, S. M. (2012). Remuneration for Employees in Family Businesses: A Regional Comparative Analysis of Spain and Mexico. Cuadernos De Administración, 23(41). https://doi.org/10.11144/Javeriana.cao23-41.reef
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