error
Subscriptions are not available for this site while you are logged into your current account.
close
Skip to main content
Submit RFP

      In family businesses, ownership means more than equity. It reflects identity, responsibility and a long-term commitment that often spans generations as a custodian, rather than ‘just’ an owner. However, as businesses grow, non-family leaders play an increasingly important role in shaping that future. They are often expected to think like owners, to take decisions for the long term, to protect what has been built and to balance growth with sustainability.

      Yet this can create a natural tension. Family owners want to preserve control and continuity.
      Non-family leaders want to feel meaningfully invested in and to have the opportunity to participate in what they are helping to build. The challenge is not resolving one at the expense of the other. It is creating alignment between both.

      For many family businesses, that alignment is being shaped through more thoughtful approaches to remuneration, designed to reflect both the commercial realities of leadership and the long-term priorities of ownership.

      See how we support family businesses
      shashi prashad
      Shashi Prashad

      Tax Partner KPMG Enterprise

      KPMG in the UK

      Olivia Edwards
      Olivia Edwards

      Family Business Relationship Lead

      KPMG in the UK

      A shared challenge: Different perspectives on ownership

      For family shareholders, equity is rarely just a financial instrument. It is tied to legacy, governance and often deeply personal family dynamics. Bringing non-family individuals into that structure, even with minority stakes, can introduce complexity that many families are understandably reluctant to take on.

      At the same time, senior non-family leaders are operating in a competitive talent market. They are often comparing opportunities against private equity-backed or listed businesses where long-term incentives and wealth creation are more explicit.

      Without that alignment, there is a risk of a disconnect:

      • Owners expect long-term thinking
      • Leaders optimise for shorter-term outcomes

      Well-structured long-term incentive plans create a clear economic link between leadership performance and business success, without requiring a transfer of ownership.

      Three ways this typically shows up in practice

      In conversations with family owners and non-family leadership teams, long-term incentives tend to fall into a small number of recurring approaches. Each reflects a different way of thinking about alignment, rather than a set of options to be lifted and applied in isolation.

      In some businesses, long-term remuneration evolves from a desire to recognise loyalty and sustained contribution over time. This is often seen in salary-linked awards, where outcomes are anchored to a multiple or percentage of base pay over a multi-year period, linked to achievement of business-related performance conditions.

      These arrangements tend to sit comfortably in environments where continuity, trust and long-term relationships are already strong and there is a desire to ‘keep things simple’. They reinforce commitment, but do not always create a direct link to the value being built within the business, due to the fixed nature of the relationship to salary.

      In other cases, particularly where the business is entering a new phase of growth or professionalisation, there is a shift towards more explicit performance alignment through KPI-driven incentives.

      Here, rewards are typically linked to financial or strategic outcomes such as EBITDA or other growth metrics, often delivering a percentage of growth realised over a target threshold. The intent is not simply to introduce measurement, but to create a clearer connection between what the business is trying to achieve and how leadership is rewarded.  This approach often removes the cap that a salary linked LTIP will naturally impose, creating greater alignment – but equally introducing a risk of ‘windfall’ gains in extreme circumstances,

      The nuance is in how these are used. The strongest outcomes tend to come where these measures support the broader direction of the business, rather than narrowly defining it.

      For many family businesses, the most significant shift comes with value-linked incentives, often structured through mechanisms such as phantom equity. These arrangements link reward to the increase in value of the business over time, without introducing actual share ownership.  This allows participants to not only benefit from the underlying earnings and profitability of the group, but also an external (or quasi-external) view of the quality of those earnings, through the multiple applied when valuing a whole business.

      What sits behind this is often less about structure and more about intent. It reflects a desire to bring leadership teams closer to the long-term journey of the business, while preserving the family’s role as owners.

      This is typically where conversations move beyond remuneration mechanics and become more strategic, focused on how the business defines and shares long-term success.

      Understand remuneration options

      Bringing clarity and alignment

      Choosing the right model is only the starting point. From both an owner and leadership perspective, the effectiveness of any plan depends on how it is designed and communicated. Key considerations include:

      • Time horizon, typically multi-year (3 to 5 years, often linked to a business plan);
      • Frequency of awards (rolling annual awards vs periodic);
      • Performance measures and recognising over-performance;
      • Clarity of outcomes and reward;
      • Affordability and cash flow;
      • Perceived fairness across stakeholders.

      At its best, an incentive structure should answer two questions clearly:

      For owners:

      are we rewarding the right behaviours?

      For leaders:

      is this worth committing to for the long term?

      Bringing clarity and alignment

      Introducing long-term incentives in a family business often means balancing different perspectives, including family ownership priorities, leadership expectations and the long-term direction of the business.

      In this context, having an independent third party can be particularly valuable. It creates space for more open, balanced conversations and helps both owners and leaders step back from individual positions to focus on what is right for the business as a whole, both now and over time.

      This often begins by simplifying the choices, setting out the key approaches, trade-offs and implications, before working together to shape a structure that reflects your priorities. From there, the focus moves to designing the detail, modelling outcomes and supporting implementation in a way that is clear and aligned.

      The aim is not just to design a plan, but to build alignment, confidence and a shared understanding of how value will be created and rewarded going forward.

      A different way of thinking about ownership

      For family businesses, the question is rarely whether to share ownership. It is how to share the benefits of ownership.

      Cash-based long-term incentives offer a way to do this. They allow family owners to retain control of the business while creating a clear, meaningful link between the success of the business and the rewards of those leading it day to day.

      When structured well, they achieve more than alignment on paper. They create a shared perspective between owners and leaders, grounded in long-term value rather than short-term outcomes.

      This is not about replicating public company models or importing private equity structures. It is about finding an approach that reflects the character of the business, the priorities of the family and the ambitions of the leadership team.

      In doing so, family businesses move beyond a binary choice of equity or not, towards a more considered view of what ownership really means and how it can be extended without being diluted.

      Shape your workforce for the future

      Our operations insights

      Something went wrong

      Oops!! Something went wrong, please try again
      MTD

      Get in touch

      Discover why organisations across the UK trust KPMG to make the difference and how we can help you to do the same.

      Contact us