To Pay or Not To Pay – Family Business and Board Compensation Webinar Recap

We had a great turnout on the family business and board compensation webinar. It was rated 3.5 on a 4-point scale for overall quality. Members found the learning experience to be extremely valuable as the topic of compensation is complex and emotionally charged for families.

Here are some key learning points:

  • Compensation is a challenging topic for families because fair isn’t always equal AND equal isn’t always fair. Family members come with different talents, skill sets, experiences and different contribution levels and therefore should be compensated differently.

  • Creating a compensation philosophy or policy for the family is a great way to alleviate the many challenges we talked about on the webinar. Families need to talk about compensation, come to an agreement and write down the policy. Here are some conversation starters to help guide the conversation.

o   Are we going to compensate in the 75th percentile of our industry?

o   Are we going to regularly benchmark all company positions with industry standards?

o   Are we are going to compensate on achievement of both short and long term goals?

o   Are we going to compensate the family council chair or not?

o   Are we going to compensate family committees and taskforces? If so, how?

o   Are we going to pay family members on the board? If so, are we paying the same as independents?

  • Many times, family members get paid less for board service. I’ve seen this trend in a couple different comp studies. I think family members bring just as much value as independents. They are doing similar work and have the same fiduciary responsibility. Family members bring the family perspective and alignment to family values. They know where the family is headed and they can build bridges among individuals or family branches.

  • The most common types of board compensation are annual fee or retainer and payment per meeting. Compensation is tied to company size, annual revenue and family philosophy. Keep it simple and compensate directors in the same fashion.

  • Most Family Council Chairs don’t get paid for their service which we think is a disservice. One of the emerging trends is recognizing the importance of the family work, and recognizing and appreciating the effort, the time and level of responsibility Family Council Chairs put in to helping the family side of the equation. Also, when a person is compensated, there’s a higher level of responsibility and accountability perceived by the person. Therefore, they are more likely to perform at a higher level.

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