This paper examines the impact of corporate governance innovations on
top director compensation in a sample of 213 large UK companies betwee
n 1988 and 1993. An enabling factor in the analysis is access to surve
y data on recent corporate governance changes in UK companies, The pap
er finds that director compensation and current shareholder returns ar
e positively correlated. However, in line with other recent UK researc
h the paper finds little evidence of a link between directors' pay (sa
lary 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 n
o part in shaping directors' pay. (C) 1997 Elsevier Science B.V.