Taming Excessive Pay: The Moderating Effect of Boards in French Family-Owned Firms

Abstract

Purpose – This study investigates the effect of family ownership on excessive CEO compensation in French-listed firms and examines the moderating role of board governance mechanisms. Design/methodology/approach –Grounded in agency, managerial power, stewardship, and socioemotional wealth theories, the study employs Ordinary Least Squares (OLS) regression on a sample of 196 family firms listed on the CAC All-Shares Index over the period 2008–2015. Findings – The results show that family ownership significantly reduces excessive CEO compensation, supporting stewardship and socioemotional wealth perspectives. Board independence, gender diversity, and independent compensation committees further strengthen this monitoring effect by limiting excessive pay practices. Interestingly, CEO duality is associated with lower excessive CEO compensation in the French context, challenging traditional entrenchment arguments. In contrast, board size and meeting frequency show no statistically significant impact. Practical implications – The findings highlight the importance of effective board governance structures in aligning executive compensation with firm interests and support the effectiveness of French governance frameworks, such as the AFEP-MEDEF code and the Cope-Zimmermann law. Originality/value – This study contributes to the literature by examining the underexplored context of French family firms and by simultaneously analysing multiple board governance mechanisms. The results provide a more comprehensive understanding of how qualitative board attributes, particularly board independence and board gender diversity, strengthen governance and reduce excessive CEO compensation.