In this paper, we empirically examine how the corporate governance affects the relation between real earnings management and CEO compensation. To perform the analysis, we hand collect CEO compensation data for fiscal years 2006-2010 from Financial Supervisory Service's Data Analysis, Retrieval and Transfer System (DART). Our results are given as follows. When the level of corporate governance is relatively high, there exists a negative (positive) relation between income-increasing (-decreasing) real earnings management and CEO compensation. In contrast, when the level of corporate governance is relatively low, we find no systematic association between income-increasing (-decreasing) real earnings management and CEO compensation. These results suggest the importance of corporate governance in terms of the effectiveness of CEO compensation contract. That is, in order to penalize properly the manager's behavior which distorts the firm's real operating activities through pay cut, the higher level of corporate governance should be supported. This paper, by demonstrating the systematic association between real earnings management and CEO compensation and the impact of corporate governance on such relation, provides a new insight about role (or effectiveness) of CEO compensation and corporate governance. More specifically, The significant relation between real earnings management and CEO compensation when the level of corporate governance is relatively high, suggests that the CEO compensation contract is effective in restricting the manager's earnings management behavior through real activity manipulation. Also, the insignificant association between real earnings management and CEO compensation when the level of corporate governance is relatively low, stresses the role of corporate governance. A large number of prior literature provides the evidence that the corporate governance is one of the key sources which affects the effectiveness of the compensation contract. Similarly, our results establish that, for the sake of establishing the effective CEO compensation contract which motivates the manager to provide an effort for the best interest of the shareholders, the level of corporate governance is essential.