Wealth and executive compensation

Using new data on the wealth of Swedish CEOs, I show that higher wealth CEOs receive stronger incentives. Since high wealth (excluding own-firm holdings) implies low absolute risk aversion, this is consistent with a risk aversion explanation. To examine whether wealth is likely to proxy for power, I use lagged wealth (typically measured before the CEO was hired), and the results remain for one of two incentive measures. Also, the wealth-incentive result is not stronger for CEOs likely to face limited owner oversight. Finally, wealth is unrelated to pay levels, and is hence unlikely to proxy for skill.