© 2019, © 2019 Informa UK Limited, trading as Taylor & Francis Group. Previous studies suggest that CEOs may be incentivised to pursue actions aimed at restoring equity when pay deviates from the predicted CEO labour market compensation rate. This study investigates the effect of corporate governance (CG) quality on CEO pay deviation in an emerging economy characterised by weaker external corporate regulatory environment. Using a unique hand-collected data of 185 South African listed firms over a six-year period, We document that whereas CG quality impacts negatively on total CEO pay deviation, this is only conspicuous when the CEO is overpaid. CG quality has no effect on CEO compensation when the CEO is underpaid. We find that CEO underpayment reduces firm value in poorly-governed firms. In contrast, CEO overpayment has no effect on firm value irrespective of the level of CG quality. The findings imply that recent CEO pay level agitations have resulted in the design of CG mechanisms that reduces the tendency of CEO pay to adjust upwards. The results are robust to alternative econometric techniques and endogeneity concerns.