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Cronyism and the Determinants of Chairman Compensation

Oxelheim, Lars LU and Clarkson, Kevin (2015) In Journal of Business Ethics 131(1). p.69-87
Abstract
This study examines determinants of chairman compensation in a supervisory board setting and, specifically, the relationship between chairman and CEO compensation. Using a sample of publicly listed firms in Sweden, the study indicates that chairman compensation—

despite its fixed nature—is reflective of firm performance via a positive relationship to CEO compensation. As CEO compensation is set before chairman compensation, we argue that the chairman may be inclined to conspire with the CEO in earnings management efforts at the expense of monitoring on behalf of investors. Supporting our cronyism argument, we find evidence that the gap between chairman

and CEO compensation is less at firms where the chairman had... (More)
This study examines determinants of chairman compensation in a supervisory board setting and, specifically, the relationship between chairman and CEO compensation. Using a sample of publicly listed firms in Sweden, the study indicates that chairman compensation—

despite its fixed nature—is reflective of firm performance via a positive relationship to CEO compensation. As CEO compensation is set before chairman compensation, we argue that the chairman may be inclined to conspire with the CEO in earnings management efforts at the expense of monitoring on behalf of investors. Supporting our cronyism argument, we find evidence that the gap between chairman

and CEO compensation is less at firms where the chairman had previously served in the executive management team. The close ties between the chairman and CEO compensation add to the understanding of the relative success of the managerial power theory versus the agency theory in explaining CEO compensation. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Chairman compensation, CEO compensation, Cronyism, Pay-for-performance, Ownership structure, Supervisory board
in
Journal of Business Ethics
volume
131
issue
1
pages
69 - 87
publisher
Springer
external identifiers
  • wos:000361719300006
  • scopus:84942292738
ISSN
1573-0697
DOI
10.1007/s10551-014-2260-2
language
English
LU publication?
yes
id
c4fa52cf-f079-4116-b5e6-9f43fa6f4a05 (old id 4647898)
alternative location
http://link.springer.com/article/10.1007%2Fs10551-014-2260-2#
date added to LUP
2014-09-19 10:06:41
date last changed
2017-10-01 03:07:31
@article{c4fa52cf-f079-4116-b5e6-9f43fa6f4a05,
  abstract     = {This study examines determinants of chairman compensation in a supervisory board setting and, specifically, the relationship between chairman and CEO compensation. Using a sample of publicly listed firms in Sweden, the study indicates that chairman compensation—<br/><br>
despite its fixed nature—is reflective of firm performance via a positive relationship to CEO compensation. As CEO compensation is set before chairman compensation, we argue that the chairman may be inclined to conspire with the CEO in earnings management efforts at the expense of monitoring on behalf of investors. Supporting our cronyism argument, we find evidence that the gap between chairman<br/><br>
and CEO compensation is less at firms where the chairman had previously served in the executive management team. The close ties between the chairman and CEO compensation add to the understanding of the relative success of the managerial power theory versus the agency theory in explaining CEO compensation.},
  author       = {Oxelheim, Lars and Clarkson, Kevin},
  issn         = {1573-0697},
  keyword      = {Chairman compensation,CEO compensation,Cronyism,Pay-for-performance,Ownership structure,Supervisory board},
  language     = {eng},
  number       = {1},
  pages        = {69--87},
  publisher    = {Springer},
  series       = {Journal of Business Ethics},
  title        = {Cronyism and the Determinants of Chairman Compensation},
  url          = {http://dx.doi.org/10.1007/s10551-014-2260-2},
  volume       = {131},
  year         = {2015},
}