Henry Blackiston Published on the Family Office Association's Newsletter
"Compensating the CEO of a Single Family Office"

Henry Blackiston's article, "Compensating the CEO of a Single Family Office," was published in the Fall 2009 issue of the Family Office Association's Newsletter. The article discusses single family offices, which are private companies that manage investments and trusts for single wealth families. The company's financial capital is the family's own wealth, often accumulated over many family generations. A family office can cost over $1 million to operate, so the family's net worth often exceeds $500 million. The purpose of Henry's article is to briefly touch on some of the common ways to meet the challenges of compensating a CEO who will be motivated to stay for many years while also focusing on the interests and goals of the family and protecting their interests.

In the article, Henry first discusses the employment agreement, noting, "Probably the first task is to negotiate a proper employment agreement, preferably before the individual is hired, which protects the CEO from arbitrary termination, properly defines the CEO's duties and compensation, and also protects the family through appropriate restrictive covenants and 'golden handcuffs.'" The second topic Henry discusses is incentive pay. Henry points out that "If designed correctly, an incentive pay program can encourage long-term employment by the CEO and key members of a family office management, and by focusing behavior on achieving targeted goals. It can also create a productive relationship…. Regardless of the timing of the establishment of the incentive program, family offices often have common goals which impact the design of incentive pay."

Henry concludes, "A family office is a unique environment with unique challenges for a CEO. Designing a proper employment agreement with appropriate incentive pay arrangements can go a long way toward insuring that the relationship between the CEO and the family is a long and happy one."