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Pay More for a Non-Family Executive?

Dear Advisor:

We have a large number of family members in our fourth-generation business. Our policy is to give jobs to family members wanting them, but family member pay is quite low. We've decided we need an outsider to be CFO, but we doubt we can find one for the compensation that would be appropriate, given our salary scale. Any suggestions?

 


If your family business needs an outside CFO, we suggest you get one. That professional's compensation should be determined by the market, not by what family members are paid. Family members in the business should agree that they are making an investment which will add value to the business and agree that the family's decision to keep family pay low should not restrict appropriate business investments.

As to your salaries, the family obviously needs to explore the issue in-depth. Artificially low compensation can be ruinous to family relations. Excellent family employees may shun the business that they'd love to join were pay not an obstacle. Family members unable to get other employment may accept low pay and a job of last resort. Perhaps your family compensation policy is posted in deeply-held family values, but it sounds like it may be holding you back and causing problems. It may be time for some family traditions to change.

The Advisor

 

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