Corporate governance and executive compensation

This paper examines the impact of corporate governance innovations on top director compensation in a sample of 213 large UK companies between 1988 and 1993. An enabling factor in the analysis is access to survey data on recent corporate governance changes in UK companies. The paper finds that director compensation and current shareholder returns are positively correlated. However, in line with other recent UK research the paper finds little evidence of a link between directors' pay (salary and bonus) and pre-dated shareholder returns. There is also some evidence that governance variables play a role in shaping top director pay. Companies which adopt remuneration committees are seen, in some circumstances, to have lower growth rates in top director compensation. Separating the roles of CEO and chairman, however, appears to play no part in shaping directors' pay.