Preliminary and Incomplete Please do not cite without author’s consent

Abstract

This paper investigates the relationship between different aspects of the corporate governance structure within firms and the compensation of top executives. Using data from over 400 Canadian firms which either have traded or currently trade on the Toronto Stock Exchange, we analyze how the level and composition of the compensation for their top 5 executives is related to key characteristics of commonly considered governance related factors. The media is full of stories suggesting a relationship between large executive compensation packages and failures in governance at various levels of organizations, but there exists little formal analysis on these relationships. We find evidence that differences in internal governance features at the level of the CEO, compensation committee and board of directors influence executive compensation. Our results complement those of many existing, US-based studies, but our broader consideration of both internal and external measures of corporate governance demonstrate an important role for both of these factors and raise some interesting questions regarding best practices for corporate governance