Can Boards with a Majority of Independent Directors Lower CEO Compensation?

Previous studies have found that board composition influences CEO compensation. However, these findings are susceptible to bias caused by endogeneity and outliers. This paper re-examines the above relation by exploring the impact on CEO total pay of a mandate for board composition imposed exogenously by US stock exchanges. I find that, after excluding a few notable outlier firms, boards that comprise a majority of independent directors have no influence on CEO total pay. Moreover, the requirement for an independent compensation committee has a perverse effect by enhancing (rather than lowering) CEO total pay. These findings cast doubts on the effectiveness of the mandate and suggest that the mandate may have no effect (or even an adverse effect) on limiting CEO total pay