Compensation to executives : high, low or nothing?

Prior studies argue that the board and management of a firm should maximize shareholder value. Also, there is evidence that compensation levels are linked to firm performance as well as monitoring, in other words, the composition of the board influence compensation. We document no correlation between CEO compensation and firm performance for a sample of Swedish companies listed on the Stockholm Stock Exchange (SSE) over the sample period 1999 to 2008. However, the Industry firms might pay the CEO for performance. Also, stock ownership influence compensation levels; when the five largest shareholders increase their holdings, CEO compensation levels decrease. We interpret this finding as that monitoring is important and the agency costs can be reduced by higher holdings by institutional investors