The impact of ownership structure on Chief Executive Compensation: Case of Swedish listed firms

Abstract

This paper is aimed at studying the elationship between ownership structure via the separation of cash flow and voting right and its impact on executive compensation in Swedish list companies Using a cross sectional analysis of data on ownership concentration, voting right, executive compensation and control variables such as performance and company size from 2008 annual report. We found out that the ownership structure of most Swedish listed firm are concentrated with the largest owner having an average equity stake of 21.7% and a voting right of 33% in the ownership structure. The separation of equity stake (cash flow right) from voting rights is a result of control enhancing devices (dual class share and pyramidal structure). The wide deviation of cash flow right and voting right indicates a high degree of separation of control from ownership and the extend of the conflict of interest within Swedish listed firms The regression analysis shows that ownership variables like cash flow and voting right have no significant impact on the level of executive compensation. This is as a result of the fact that the level of CEO compensation may depends on the industry where the firm operates, micro-economic fluctuations which blurt the link between ownership concentration and the level of executive compensation and also the country specific characteristics like the equalitarian norms which prevails in Sweden.