What Drives CEO Pay and How Should Executive Compensation Be Designed?
Why are CEOs in Denmark among the highest paid in the Nordic countries, and how can executive compensation be designed to support long-term value creation? In a new episode of the Danish podcast Rig på Viden, Professor Trond Randøy from the Center for Corporate Governance discusses research on CEO compensation and incentive structures.
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How much should a CEO be paid and what should determine that compensation?
These questions are at the centre of a new episode of Rig på Viden, featuring Professor Trond Randøy from the Center for Corporate Governance at Copenhagen Business School.
In the episode, Trond Randøy discusses research on CEO compensation, with a particular focus on Denmark and the Nordic countries, as well as comparisons with the US.
One of the findings discussed is that CEO pay in Denmark has increased considerably relative to other salaries. Danish CEOs are also among the highest paid in the Nordic countries. One explanation is the composition of the Danish stock market: Denmark has fewer listed companies than, for example, Sweden, but several of its listed companies are considerably larger. These findings suggest that company size plays an important role in determining executive pay levels.
The conversation also looks beyond how much CEOs are paid. How compensation is structured and which behaviours and outcomes it rewards is an important corporate governance question. Well-designed incentive structures can play an important role in aligning executive decision-making with the long-term interests of companies and their stakeholders.
The episode provides a research-based perspective on what drives CEO compensation and how different approaches to executive pay can influence corporate decision-making and long-term value creation.
The Rig på Viden episode is available in Danish. Listen to the episode on Spotify.
