Pyramidal ownership in Swedish public companies – implications for top executive compensation

Abstract

The correlation between pyramidal structures along with family ownership and executive compensation has been studied in Swedish public companies between the years 2001-2007. The results show that no difference in executive compensation can be attributed to the pyramidal structure itself, but in combination with family ownership it can. CEOs at family controlled firms on a pyramidal level 2 are experiencing a compensation premium compared to CEOs at other family controlled firms. Their salary is also more sensitive to changes in firm performance. Also for family controlled pyramidal level 1 firms is a CEO compensation premium against other family controlled firms observed, which however is reduced in case the chairman of the board is related to the controlling family. The results support a view that the pyramidal structure in combination with family ownership may create agency problems which result in a CEO compensation premium relative to non-pyramidal family firms.