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Chief Executive Pay and Remuneration Committee Independence


  • The author thanks Martin Conyon, Alistair Bruce, Sarah Wilson, Guy Callaghan (Manifest Information Services Ltd), the anonymous referee, and participants at EARIE 2007 for helpful comments. The author is indebted to Steve Thompson and Peter Wright for their numerous contributions and for the generous guidance they continue to provide.


This article tests the impact of remuneration committee independence on Chief Executive (CEO) pay. FTSE350 companies between 1996 and 2008 are used to assess whether remuneration committees facilitate optimal contracting or whether CEOs capture the pay-setting process and inflate their own remuneration. This panel has a number of advantages over prior samples and, in particular, contains a more comprehensive assessment of non-executive directors’ independence. No evidence of a relationship between CEO pay and director independence is found, challenging the theory of managerial power and the received wisdom of institutional guidance.