CEO remuneration packages in Sweden and their relevance for shareholder wealth : A study of CEO compensation in large-cap companies listed on NASDAQ OMX Stockholm

Abstract: Purpose – The purpose of this study is to investigate the relationship between CEO compensation and different company characteristics; including shareholder returns, sales, board size, family ownership (whether the company is family-owned or not) and firm size. Research design – This study uses quantitative empirical data collected from companies’ annual reports and other relevant reports from years 2011-2015. The data was analyzed with descriptive statistics and hypothesis testing. The sample is limited to companies listed on NASDAQ OMX Stockholm large cap, year 2017. Findings – The main findings in the study indicate that there is no relation between total CEO compensation and shareholder wealth. Nor between changes in compensation and changes in returns a relationship could be seen. Instead, strong associations between total CEO compensation and board size, family ownership and firm size were found. These findings suggest that it is not the performance of the company but other factors that decide the compensation. Contribution – The main contributions of this study are the findings on the relevance of CEO compensation for shareholder returns, as well as that other factors can affect the level of compensation. These results are in agreement with what previous studies have found. Value – This study brings value to the field by showing the necessity to address the issues of excessive compensation packages to CEOs. It also shows that development of corporate governance codes may be needed to prevent the use of unjustified high payouts at the expense of the shareholders.