CEO Compensation : Relationship with Performance and Influence of Board of Directors

Abstract: This paper tries to find the relationship between the compensation given to the chief executive officer and the performance of the company. Further, it tries to determine the influence of the size of the Board members on the pay scale of the executive. The data consisted of the largest thirty companies in Sweden for the period of 2004-2008. After controlling for firm size and growth opportunities, I find a negative and insignificant relationship between pay and performance. Contradictory to previous studies no correlation between large board size and chief executive officers compensation was found. This paper adds more empirical evidence to the idea of chief executives pay being independent of his performance.