Say on Pay and the Outrage Constraint
45 Pages Posted: 20 Sep 2010
Date Written: September 20, 2010
Abstract
Say on pay is an important regulatory innovation in the area of executive remuneration, traditionally dominated by disclosure based approaches.
In this paper I present a model of the regulatory framework for say on pay as it operates in Australia and the UK. Based on the concept of regulatory space, I present the regulated remuneration cycle as an annual cycle of four activities (remuneration practice, disclosure, engagement and voting), each of which is subject to regulation in multiple forms by a variety of regulators. This illustrates how institutional investors make rules in relation to all four activities. However, it is their activities in the sphere of remuneration practice that form the basis for their activities in engagement and voting.
I then examine the empirical evidence of its operation in the first three years in the UK (2003-2005) and Australia (2005/06 - 2007/08) using content analysis. While there is evidence of the vote 'having an effect', this paper shows that the effect was very different over the first three years of its operation in the UK as opposed to Australia.
This paper updates the paper 'Is the Outrage Constraint an Effective Constraint on Executive Remuneration? Evidence from the UK and Preliminary Results from Australia (March 18, 2007). Available at SSRN: http://ssrn.com/abstract=974965' by providing results for the first three years of a disclosure and vote regime in Australia, as well as the UK.
Keywords: executive compensation, regulation, regulatory space, advisory vote, regulation, UK, Australia, best practice, outrage constraint, institutional shareholders, say on pay
JEL Classification: G18, G30, G32, G34, G38, K20, K22, M14, M52, N20
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Are CEOS Really Paid Like Bureaucrats?
By Brian J. Hall and Jeffrey B. Liebman
-
Are CEOS Really Paid Like Bureaucrats?
By Brian J. Hall and Jeffrey B. Liebman
-
The Other Side of the Tradeoff: The Impact of Risk on Executive Compensation
-
Good Timing: CEO Stock Option Awards and Company News Announcements
-
Good Timing: CEO Stock Option Awards and Company News Announcements
-
The Use of Equity Grants to Manage Optimal Equity Incentive Levels
By John E. Core and Wayne R. Guay
-
The Other Side of the Tradeoff: the Impact of Risk on Executive Compensation
-
Stock Options for Undiversified Executives
By Brian J. Hall and Kevin J. Murphy