{"id":1082,"date":"2023-11-15T08:05:31","date_gmt":"2023-11-15T07:05:31","guid":{"rendered":"https:\/\/blog.iese.edu\/family-business\/?p=1082"},"modified":"2024-01-07T18:26:29","modified_gmt":"2024-01-07T17:26:29","slug":"pension-priorities-the-impact-of-family-ties-on-ethical-decision-making","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/family-business\/2023\/pension-priorities-the-impact-of-family-ties-on-ethical-decision-making\/","title":{"rendered":"Pension priorities: the impact of family ties on ethical decision making"},"content":{"rendered":"

With corporate responsibility<\/strong> gaining traction around the world, more and more business leaders are considering the ethical dimensions of management. Among global scholars, pension funding<\/strong> is one of the hot-button topics under review.<\/p>\n

Employee pension schemes are common in the U.S. and might soon expand in Europe, where governments are considering hybrid models to solve the troubling tensions in public systems<\/strong><\/a>.<\/p>\n

At its core, pension funding holds significant ethical weight \u2013 after all, how firms fund their pension schemes directly impacts the future well-being of their employees.\u00a0<\/strong>My recent research<\/strong><\/a> delved deeper into this issue, especially as it relates to family firms <\/strong>as the primary driver of global economic wealth.<\/p>\n

In light of their socioemotional ties, do family-owned businesses act more ethically <\/strong>vis-\u00e0-vis employee pension funds?<\/p>\n

This is one question our study aimed to discover.<\/p>\n

Pension underfunding<\/strong>\u00a0and family firms<\/strong><\/span><\/h2>\n

Beyond the end-all of financial profit, family businesses are staunch defenders of creating socioemotional wealth <\/strong>(SEW), encapsulated by non-financial values like reputation<\/strong> and enduring familial governance<\/strong>.<\/p>\n

For family firms, the decision to underfund the employee pension scheme would pose an ethical dilemma, and potentially undermine their esteemed standing <\/strong>and deep-rooted affiliations<\/strong> with employees and the wider community.<\/p>\n

Indeed, the short-term advantages<\/strong> of pension underfunding, such as low-cost financing by circumventing resources, pale in comparison with the resultant adverse repercussions. <\/strong><\/p>\n

Three potential mitigating factors<\/strong><\/span><\/h2>\n

Within this framework, our study suggests that family-centric businesses are less inclined to underfund pensions in light of their reputational risks, while integrating three mitigating factors into the equation:<\/p>\n

1 \u2013 Financial turbulence<\/strong>\u00a0<\/span>
\nUnder financial duress, family firms perceive risks for both their emotional wealth and their long-term sustainability. These circumstances might increase the likelihood<\/strong> of pension underfunding, thus diluting the effect of our core hypothesis.<\/p>\n

2 \u2013 Generational stage<\/span>
\n<\/strong>Evidence suggests intergenerational differences in terms of family members\u2019 management approach and personal identification with the firm, whereby first-generation members feel more personally exposed and connected<\/strong> to the firm compared to subsequent generations.<\/p>\n

Under this construct, first-generation leaders might be more ethically inclined<\/strong> and attentive to ethical pension funding, with a tapering-off effect in later generations.<\/p>\n

3 \u2013 Eponymous family firms: the power of a name<\/strong>\u00a0<\/span>
\nNames hold significant meaning in all social domains, and the business arena is no exception. In the realm of family business, companies that bear the name of their family owners<\/strong> create a direct association with the family and the brand, making eponymous family firms less likely to underfund pensions.<\/p>\n

Research outcomes<\/strong>\u00a0<\/span><\/h2>\n

Driven by SEW, family firms generally align with employee interests<\/strong>, especially with regard to pension underfunding. Among the family firms included in our study, they prioritized preserving their family\u2019s reputation and adhering to ethical standards<\/strong>.<\/p>\n

Surprisingly, pension underfunding levels were not influenced by financial distress<\/strong>, implying that family firms continue to follow their ethical compass even in times of turbulence.<\/p>\n

Lastly, as hypothesized, later-generation leaders and non-eponymous firms were found to be less cautious about pension underfunding<\/strong>, possibly because of weaker personal ties to the firm\u2019s foundation and reputation.<\/p>\n

\n

Family firms have unique emotional ties to their business, yet our study shows, they are not immune to the common challenges and pressures<\/strong> faced by their non-family counterparts.<\/p>\n

At the same time, our conclusions should serve as a reminder for family firms to ensure the ethical management<\/strong> of their employee pension schemes and their transcendence across generations<\/strong>.<\/p>\n

 <\/p>\n

Image by<\/em> Raphael Koh<\/a> on <\/em>Unsplash<\/em><\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

With corporate responsibility gaining traction around the world, more and more business leaders are considering the ethical dimensions of management. Among global scholars, pension funding is one of the hot-button topics under review. Employee pension schemes are common in the U.S. and might soon expand in Europe, where governments are considering hybrid models to solve […]<\/p>\n","protected":false},"author":2410,"featured_media":1084,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[12,981],"tags":[119654],"class_list":["post-1082","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-family","category-leadership","tag-employee-pensions","megacategoria-mc-family-business"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts\/1082","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/users\/2410"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/comments?post=1082"}],"version-history":[{"count":11,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts\/1082\/revisions"}],"predecessor-version":[{"id":1107,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts\/1082\/revisions\/1107"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/media\/1084"}],"wp:attachment":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/media?parent=1082"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/categories?post=1082"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/tags?post=1082"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}