Does Say‐on‐Pay Matter? Evidence from Say‐on‐Pay Proposals in the United States

Natasha Burns · Kristina Minnick

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Corporate Finance and Governance Auditing, Earnings Management, Governance Political Influence and Corporate Strategies

Abstract

Abstract We investigate the effect of say‐on‐pay (SOP) proposals on changes in executive and director compensation. Relative to non‐SOP firms, SOP firms’ total compensation to CEOs does not significantly change after the proposal. However, the mix of compensation does change—companies move away from using cash compensation toward more incentive compensation, offsetting the reduction in bonus. Further, the mix of compensation of non‐CEO executives changes similarly to that of CEOs. Compensation to directors of SOP firms increases less than non‐SOP firms. Firms whose CEOs are well compensated, especially with cash‐based compensation, are most likely to receive a proposal.

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References

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2016Remuneration committees, shareholder dissent on CEO pay and the CEO pay–performance link 2016The Impact of Investor Horizon on Say‐on‐Pay Voting 2021The impact of shareholder intervention on overinvestment of free cash flow by overconfident CEOs 2020Managerial discretion, say on pay, and CEO compensation

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