Family Ownership and ESG Performance: The Moderating Role of Sustainability Committee and ESG-Linked Executive Compensation

Grounded in agency theory, this article examines the relationship between family ownership concentration and environmen-tal, social, and governance (ESG) performance, and analyzes the moderating role of sustainable governance mechanisms.Specifically, it assesses whether sustainability committees and ESG-linked executive compensation moderate the relationshipbetween family ownership concentration and ESG performance. The empirical setting comprises 150 publicly listed Europeanfamily firms observed over the period 2010–2021. Using panel data regressions with multiple fixed effects to control for unob-served heterogeneity, the results show that higher levels of family ownership are negatively associated with ESG performance.However, this effect is significantly weakened in firms that adopt sustainability committees and ESG-linked executive compen-sation schemes. These findings indicate that the impact of family ownership on sustainability is contingent upon the govern-ance architecture that shapes the exercise of ownership power. From a theoretical perspective, the results contribute to agencytheory by demonstrating that monitoring and incentive alignment mechanisms can mitigate Type II agency tensions betweencontrolling families and minority shareholders in ESG-related domains. From a practical standpoint, the findings suggest thatin contexts of highly concentrated family ownership, the introduction of formal ESG-oriented monitoring and incentive mecha-nisms can reduce discretionary decision-making in ESG-related domains and foster greater alignment between family objectivesand broader stakeholder expectations, thereby supporting a more balanced and long-term sustainability orientation.