Visibility, Size and Growth Opportunities as Determinants of Equity-Based Compensation

Sammanfattning: The purpose of this paper is to increase the understanding for the use of long-term equity-based executive compensation primarily defined as stock option grants. We use data for 204 Swedish stock listed companies and apply a set of explanatory variables based on previous international research. We find statistical support for the hypotheses that firm size, growth prospects and CEO age determine the fraction of long-term equity-based remuneration in the total compensation. On the other hand, we do not obtain consistent evidence for similar hypotheses with respect to CEO firm ownership, visibility and cash. The main conclusion drawn on the basis of our study is that the variables we tested may in fact give some indication with regard to the structure of the CEO compensation, namely, the probability that the company chooses to compensate its CEO with long-term equity-based remuneration rather than with short-term cash payments such as fixed salary or bonuses. However, further research is required to make more long-going conclusions with respect to the relative weight of every factor in determining the structure of the executive compensation.