Preliminary and Incomplete

This paper investigates the relationship between different aspects of corporate governance 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 various 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 both the level and composition of executive compensation, especially the CEO and, to a lesser extent, the other top executives. Considering external measures of corporate governance, we find an impact of different types of shareholders and competitive environments on executive compensation. We do not find that either the internal or external governance characteristics dominate