Agency theory suggests that the interests of opportunistic, self-interested agents conflict with those of principals. Stewardship theory suggests instead that executives' interests are aligned with company interests and that executives are thus more intrinsically motivated than agency theory implies. This study develops hypotheses regarding the psychological and situational factors that affect the applicability of each theory to executive compensation. I tested hypotheses using a unique data set of 1,238 executives from 528 private companies. Results suggest significant differences between founder-stewards and nonfounder agents that diminish with company growth, and significant effects of equity ownership and outside rounds of financing.

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Research summary: Does the degree to which founders keep control of their startups affect company value? I argue that founders face a “control dilemma” in which a startup's resource dependence drives a wedge between the startup's value and the founder's ability to retain control of decision making. I develop hypotheses about this tradeoff and test the hypotheses on a unique dataset of 6,130 American startups. I find that startups in which the founder is still in control of the board of directors and/or the CEO position are significantly less valuable than those in which the founder has given up control. On average, each additional level of founder control (i.e., controlling the board and/or the CEO position) reduces the pre‐money valuation of the startup by 17.1–22.0 percent. Managerial summary: A founder's vision and capabilities are key ingredients in the early success of a startup. During those early days, it is natural for the founder to have a powerful, central role. However, as the startup grows, founders who keep too much control of the startup and its most important decisions can harm the value of the startup. Both qualitative case studies and quantitative analyses of more than 6,000 private companies highlight that startups in which the founder has maintained control (by retaining a majority of the board of directors and/or by remaining as CEO) have significantly lower valuations than those where the founder has relinquished control. This is especially true when the startup is three years old or more. Copyright © 2015 John Wiley & Sons, Ltd.

In the last few decades, we have developed a substantial body of knowledge about CEO succession. However, except for some studies of family businesses that lack direct applicability to nonfamily CEO succession, the past studies of succession have not examined the very first succession event in a firm, when the Founder-CEO is replaced, on a largescale basis. The critical differences between later-stage succession and Founder-CEO succession include the higher level of attachment between Founder-CEOs and the firms they create, the much larger equity holdings of Founder-CEOs (which give them much more control of the firm), the fact that many Founder-CEOs remain in the firm (even though it is being run by their successors), and the fact that nearly all earlystage succession events involve outside successors (in contrast to later-stage succession research, which has focused on the insider-outsider distinction). These differences make it hard to extrapolate from later-stage succession findings to Founder-CEO succession. Therefore, in order to examine Founder-CEO succession, I used field research and grounded theory building to study the factors that should affect Founder-CEO succession in Internet start-ups. I find that there are two central intertemporal events that may affect Founder-CEO succession: The completion of product development and the raising of each round of financing from outside investors. I develop testable hypotheses about how each of these events affect the rate of succession, and then test these hypotheses using an eventhistory analysis of a unique dataset containing the succession histories of 202 Internet firms. My findings point to multiple "paradoxes of success" in which the Founder-CEO's success at achieving critical milestones actually causes the chance of Founder-CEO succession to rise dramatically.