CEO Compensation Structure in Large Cap Companies: Listed on the Stockholm Stock Exchange

Abstract: The issue of CEO compensation is both a political and an economic question, which is of general interest. Given that there is lack of research on the subject in Sweden, this thesis is aimed at filling in some of the gaps in knowledge. The goal was to examine the compensation structure for CEOs of Large Cap companies on the Stockholm Stock Exchange during 2006-2007 as well as to analyze whether CEO compensation is correlated to company performance. A combination of qualitative and quantitative methods was used for the purposes of the analysis. Our findings show that fixed compensation constitutes a large part of the total compensation package while stock-based compensation plays a minor role, which is surprising if one looks at the issue from the agency theory perspective. As far as the pay-performance relation, our regressions show that return on equity seems to be the only explanatory variable that is significantly correlated to CEO pay.