Abstract
The study finds evidence that CEO pay-performance sensitivity decreases in the variance of stock returns for NZ publicly listed firms during 1997 to 2005. Furthermore, CEOs in firms with more volatile stock prices have less performance-based compensation. Lower estimated pay-performance sensitivity indicates a weaker link between CEO pay and performance suggesting that NZ CEO pay is less affected by changes in firm value compared to their US counterparts. However, opportunistic CEOs use their presence on the compensation committee and their ability to influence the pay-setting process to divorce their option remuneration from firm performance.