Chief executive pay and remuneration committee independence

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. © 2011 Blackwell Publishing Ltd and the Department of Economics, University of Oxford.