Determinants of Chairman Compensation

32 Pages Posted: 30 Sep 2011 Last revised: 27 Jun 2014

See all articles by Lars Oxelheim

Lars Oxelheim

Research Institute of Industrial Economics (IFN); University of Agder; Knut Wicksell Center for Financial Studies, Lund University

Kevin Clarkson

Lund University

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

Oxelheim, Lars and Clarkson, Kevin, Determinants of Chairman Compensation (September 16, 2011). Journal of Business Ethics, Forthcoming; Midwest Finance Association 2012 Annual Meetings Paper. Available at SSRN: or

Lars Oxelheim

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
SE-10215 Stockholm
+46 8 665 4527 (Phone)
+46 8 665 4599 (Fax)

University of Agder ( email )

Serviceboks 422
N-4604 Kristiansand, VEST AGDER 4604

Knut Wicksell Center for Financial Studies, Lund University ( email )

P.O.Box 7080
S-220 07 Lund
+46462228744 (Phone)

Kevin Clarkson (Contact Author)

Lund University ( email )

Box 117
Lund, SC Skane S221 00

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