Determinants of Chairman Compensation
32 Pages Posted: 30 Sep 2011 Last revised: 27 Jun 2014
Date Written: September 16, 2011
This study examines determinants of chairman compensation in a supervisory board setting and, specifically, the relationship between chairman and CEO compensation. Using a sample of publicly listed firms in Sweden, the study indicates that chairman compensation – despite its fixed nature – is reflective of firm performance via a positive relationship to CEO compensation. As CEO compensation is set before chairman compensation, we argue that the chairman may be inclined to conspire with the CEO in earnings management efforts at the expense of monitoring on behalf of investors. Supporting our argument, we find evidence that the gap between chairman and CEO compensation is less at firms where the chairman has previously served on the executive management team.
Keywords: Chairman compensation, CEO compensation, Pay-for-performance, Ownership structure, Supervisory board
JEL Classification: G32, G34, L25, M12, M14
Suggested Citation: Suggested Citation