An Agency Theoretic Analysis of the Professionalized Family Firm

Abstract

The professionalized firm must evaluate the performance of managers and provide incentives that will motivate them to achieve the firm's goals. Using the agency theoretic framework we develop propositions on how differences in goals, altruistic tendencies, and strategic time horizons might affect performance evaluation and incentive compensation in family firms that employ both family and nonfamily managers and how these differences would affect the performance of the professionalized family firms relative to that of nonfamily firms.