Kris Kluver, in The Dysfunctional Family Office, calls this Two-Form Compensation. Two separate streams that solve two separate problems. First, anyone working in the company gets paid a market-rate salary for their actual job. The last name doesn't get a discount or a premium. They perform as professionals and get paid as professionals. Second, ownership distributions go to owners based on ownership percentage, regardless of whether they work in the business. The salary rewards the work. The distribution rewards the ownership. Both are real. Confusing the two is what destroys family businesses. The sibling running the company gets a CEO salary and bonus. The sibling not in the business gets the same distribution as the CEO. The system stays fair because each form is doing what it's designed to do.
How do I fairly pay family members in the business and those who aren't?
Framework: Two-Form Compensation · Chapter: Ch 12: From Alignment to Action
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