Impact of Confucianism on Compensation Structure for Founder CEOs.

CHIEF executive officers; CONFUCIANISM; INTRINSIC motivation; FAMILY values; EXECUTIVE compensation

The need and desire for incentive compensation are lower for founder CEOs who have strong intrinsic motivation and large equity ownership. We predict that the resulting difference in compensation between founder CEOs and non-founder CEOs is larger in East Asia where founders' strong intrinsic motivation and influential power are amplified by the unique Confucian culture that emphasizes the importance of family and the value of having a sense of shame. Based on the test sample from Hong Kong and Singapore and the propensity-score-matched control sample from U.S., U.K., Canada, and Australia, we show that the proportion of incentives in compensation package is smaller for founder CEOs than for non-founder CEOs and that such difference in compensation is larger in East Asia. Using Hofstede's culture indexes, we also show that such difference in compensation increases with collectivism and long-term orientation. [ABSTRACT FROM AUTHOR]

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