Determinants of Chairman Compensation An Empirical Analysis on German Large Caps

Abstract: This study examines the determinants of chairman compensation in supervisory boards. The research is based on a sample of the 30 German DAX firms and focuses on the positive relationship of chairman compensation depending on CEO compensation. We investigate upon possible cronyism influencing the compensation setting process of chairmen. This paper takes a new, reversed approach on the topic, as in previous research the emphasis was on the ability of chairmen influencing CEO wages. A regression model is used to analyze causality, identify evidence and draw conclusions regarding the influence of increases of CEO compensation on chairman compensation. According to our research it can be concluded that there is a positive relationship between CEO and chairman compensation. We cannot find a distinct proof of cronyism between chairmen and CEOs though.