To strengthen the relationship between management compensation and firm performance, listed companies are required to establish compensation committee since 2011. However, due to absence or insufficient independent directors for listed companies before 2017, whether compensation committee is able to meet that goal deserves further investigation, especially for family firms characterized by lack-of-independence board. Therefore, this study explores the establishment of compensation committee on the relationship between compensation committee and pay-performance sensitivity, and further examines the moderating effects of family control. Using samples from 2005 to 2017, the empirical results indicate that the establishment of compensation committees can improve the association between relative performance and director incentive compensation. However, the presence of family control reduces the pay-performance sensitivity, indicating the establishment of the compensation committee is less effective in family firms.