Background Note | HBS Case Collection | July 2007 (Revised September 2007)

Compensating Family Employees in a Family Business

by John A. Davis

Abstract

Explores the core issues involved in compensating family employees in a family business. Explains family interests and other factors that shape family employee compensation practices. Distinguishes between achieving effective compensation practices, which help to achieve the business's key success factors and other important interests, and strictly adhering to "professional" compensation principles, which are useful standards to try to follow but they may not meet important personal and family interests or be politically feasible. Concludes with several recommendations to guide family employee compensation practices.

Keywords: Family Business; Employees; Compensation and Benefits;

Citation:

Davis, John A. "Compensating Family Employees in a Family Business." Harvard Business School Background Note 808-021, July 2007. (Revised September 2007.)