“Something beyond us”? The Effect of Family Involvement on Employee Relations

While recent studies have investigated how groups (e.g., families) at the helm of organizations affect their financial performance, research has returned equivocal results about their effect on social performance. Embedding a corporate governance perspective within a group identity decision-making framework, this article argues that because family members consider their organization as an extension of their own family identity, these family corporations are prone to treat their employees better than non-family organizations do. This article separates ownership, control, and managerial facets of family involvement and combines a quantitative longitudinal study of Fortune 500 companies between 2004 and 2009 with a qualitative comparative study of more than 70 letters to shareholders. As a whole, this paper suggests that identity-related components of family corporate involvement positively affect the treatment of organizational members. Moreover, the qualitative approach illustrates that the organizational identity of family firms emphasizes both agreed-upon values of a group and human related factors. As a boundary to this overall positive effect of family groups, we show that the effect of family control acts along a curvilinear pattern and that family management has mixed effects on employee relations. Implications for the positive identity, corporate governance and entrepreneurship areas are discussed.