How family CEOs affect employees’ feelings and behaviors: A study on positive emotions

Abstract

Research suggests that firms with family CEOs differ from other types of businesses, yet surprisingly little is known about how employees in these firms feel and behave compared to those working in other firms. We draw from family science and management research to suggest that family CEOs, because of their emotion-evoking double role as family members and business leaders, are, on average, more likely to infuse employees with positive emotions, such as enthusiasm and excitement, than hired professional CEOs. We suggest that these emotions spread through firms by way of emotional contagion during interactions with employees, thereby setting the organizational affective tone. In turn, we hypothesize that in firms with family CEOs the voluntary turnover rate is lower. In considering structural features as boundary conditions, we propose that family CEOs have stronger effects in smaller and centralized firms, and weaker effects in formalized firms. Multilevel data from 41,200 employees and 2,246 direct reports of CEOs from 497 firms with and without family CEOs provide support for our model. This research suggests that firms managed by family CEOs, despite often being criticized as nepotistic relics of the past, tend to offer pleasant work environments.