Stingy principals or benevolent stewards: Reward practices in family versus nonfamily trucking companies

Abstract

AbstractResearch on family firms' employment practices remains equivocal with findings from studies framed on the basis of stewardship and socioemotional wealth (SEW) preservation perspectives suggesting that family firms are better employers than nonfamily peers, and findings from studies grounded on agency theory suggesting the opposite. Arguing that these two perspectives are not mutually exclusive, we theorize that, consistent with notions of compensating differentials, pay practices in family firms offer a compensatory balancing of lower base pay with pay forms and benefits signaling the kind of caring, support and long‐term commitment typical of such firms. Accordingly, while, consistent with an agentic perspective, pay rates in nonfamily firms may be higher than in family firms, consistent with the stewardship/SEW perspective, we argue that pay and benefits may be structured to offer greater long‐term reward security in family firms. Focusing on reward practices among employees in a single job in a single industry (i.e., truck drivers), we find that where there are differences, they generally favor family firms, with a significantly higher proportion of family firms paying on the basis of fixed salary (as opposed to more variable hourly/mile‐based rates), and with those firms paying hourly offering typical and “floor” rates higher than those offered by nonfamily firms. Implications for theory and practice are discussed.