Citations (8)



Shareholder Votes and Proxy Advisors: Evidence from Say on Pay

Yonca Ertimur

University of Colorado at Boulder - Department of Accounting

Fabrizio Ferri

Columbia Business School - Accounting, Business Law & Taxation

David Oesch

University of Zurich

August 2, 2013

Journal of Accounting Research, Forthcoming

We investigate the economic role of proxy advisors (PA) in the context of mandatory “say on pay” votes, a novel and complex item requiring significant firm-specific analysis. PA are more likely to issue an Against recommendation at firms with poor performance and higher levels of CEO pay and do not appear to follow a “one-size-fits-all” approach. PA recommendations are the key determinant of voting outcome but the sensitivity of shareholder votes to these recommendations varies with the institutional ownership structure, and the rationale behind the recommendation, suggesting that at least some shareholders do not blindly follow these recommendations. More than half of the firms respond to the adverse shareholder vote triggered by a negative recommendation by engaging with investors and making changes to their compensation plan. However, we find no market reaction to the announcement of such changes, even when material enough to result in a favorable recommendation and vote the following year. Our findings suggest that, rather than identifying and promoting superior compensation practices, PA’s key economic role is processing a substantial amount of executive pay information on behalf of institutional investors, hence reducing their cost of making informed voting decisions. Our findings contribute to the literature on shareholder voting and the related policy debate.

Number of Pages in PDF File: 68

Keywords: Say on pay, proxy advisors, shareholder votes, CEO compensation, shareholder activism

JEL Classification: G34, G38, J33, M12

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Date posted: March 11, 2012 ; Last revised: November 16, 2013

Suggested Citation

Ertimur, Yonca and Ferri, Fabrizio and Oesch, David, Shareholder Votes and Proxy Advisors: Evidence from Say on Pay (August 2, 2013). Journal of Accounting Research, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2019239 or http://dx.doi.org/10.2139/ssrn.2019239

Contact Information

Yonca Ertimur
University of Colorado at Boulder - Department of Accounting ( email )
419 UCB
Boulder, CO 80309-0419
United States
Fabrizio Ferri (Contact Author)
Columbia Business School - Accounting, Business Law & Taxation ( email )
3022 Broadway
New York, NY 10027
United States

David Oesch
University of Zurich ( email )
Rämistrasse 71
Zürich, CH-8006
Feedback to SSRN

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