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The Efficacy of Shareholder Voting: Evidence from Equity Compensation PlansChris ArmstrongUniversity of Pennsylvania - Accounting Department Ian D. GowHarvard Business School David F. LarckerStanford University - Graduate School of Business March 13, 2012 Stanford School of Business Research Paper No. 2097 Rock Center for Corporate Governance at Stanford University Working Paper No. 112 Abstract: This study examines the effects of shareholder support for equity compensation plans on subsequent chief executive officer (CEO) compensation. Using cross-sectional regression, instrumental variable, and regression discontinuity research designs, we find little evidence that either lower shareholder voting support for, or outright rejection of, proposed equity compensation plans leads to decreases in the level or composition of future CEO incentive-compensation. We also find that in cases where the equity compensation plan is rejected by shareholders, firms are more likely to propose, and shareholders are more likely to approve, a plan the following year. Our results suggest that shareholder votes have little substantive impact on firms’ incentive-compensation policies. Thus, recent regulatory efforts aimed at strengthening shareholder voting rights, particularly in the context of executive compensation, may have limited effect on firms’ compensation policies.
Number of Pages in PDF File: 50 Keywords: executive compensation, equity-based compensation, shareholder voting JEL Classification: G3, J33, M52 working papers seriesDate posted: March 14, 2012 ; Last revised: June 22, 2012Suggested CitationContact Information
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