Aaltodoc publication archive (Aalto University institutional repository)
School of Business | Department of Economics | Economics | 2015
Thesis number: 13852
Determinants of CEO remuneration: Study of Finnish publically listed companies
|Title:||Determinants of CEO remuneration: Study of Finnish publically listed companies|
|Year:||2015 Language: eng|
|Department:||Department of Economics|
|Index terms:||taloustieteet; economic science; johtajat; managers; palkka; pay; Suomi; Finland; osingot; dividends; omistus; ownership; pörssiyhtiöt; exchange-listed companies|
|Key terms:||CEO remuneration; Finland; share ownership concentration; shareowner typologies|
Discussion about CEO remuneration has seemed to stay current throughout decades. Recently the downturn in economy has again aroused discussions on the CEO's high remuneration levels while companies are in reality performing poorly and public has witnessed series of downsizings and lay-offs. As compensation has traditionally been seen as a reward for good performance, the witnessed events raise the question what are the CEO's actually being paid for. The determinants of CEO remuneration should be looked at a wider perspective as company performance doesn't seem to explain the remuneration levels exhaustively. Previous research has used companies' corporate governance characteristics to look for explanations.
In this thesis 117 publically listed Finnish companies are studied to search the determinants of CEO remuneration. The data was hand-collected for the research during the spring 2014 and consists of data from 2013. The main interest of this study is to estimate the effects of publically listed companies' share ownership structure on CEO remuneration. The study looks into share ownership concentration as well as different ownership typologies to see whether there is a connection with the remuneration levels and use of share based incentives.
The results of the study indicate that share ownership concentration is negatively associated with CEO remuneration levels. This suggests that concentrated share ownership results in closer monitoring on CEO performance and less use of monetary incentives. No statistically significant connection was found with shareowner typologies and CEO remuneration levels. Regarding the use of share based incentives, shareowner structure was not found to be statistically significant factor.
The results are in some aspects in line with previous findings. Share ownership concentration has been found to lower the pay levels in previous studies. On the contrary we found no statistical significance with the share owner typology variable, which has been recorded before. The categorization into different typologies is quite subjective and with different categorization method the results might change. This could be interesting to study further in the future with Finnish data.
Master's theses are stored at Learning Centre in Otaniemi.