Shareholders' Say on Pay: Does it Create Value?

65 Pages Posted: 16 Feb 2009 Last revised: 12 Nov 2009

See all articles by Jie Cai

Jie Cai

Drexel University

Ralph A. Walkling

Drexel University - Lebow College of Business

Multiple version iconThere are 3 versions of this paper

Date Written: September 4, 2009

Abstract

Congress and activists recently proposed giving shareholders a say (vote) on executive pay. We find that when the House passed the Say-on-Pay Bill, the market reaction was significantly positive for firms with high abnormal CEO compensation, with low pay-for-performance sensitivity, and responsive to shareholder pressure. However, activist sponsored say-on-pay proposals target large firms, not those with excessive CEO pay, poor governance, or poor performance. The market reacts negatively to labor sponsored proposal announcements and positively when these proposals are defeated. Our findings suggest that say-on-pay creates value for companies with inefficient compensation, but can destroy value for others.

Keywords: Say on Pay, Executive compensation, Shareholder Activism, Access to Proxy

JEL Classification: G34, G38, K22

Suggested Citation

Cai, Jie and Walkling, Ralph August, Shareholders' Say on Pay: Does it Create Value? (September 4, 2009). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1342656

Jie Cai (Contact Author)

Drexel University ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
215-895-1755 (Phone)
215-895-2955 (Fax)

HOME PAGE: http://faculty.lebow.drexel.edu/CaiJ/

Ralph August Walkling

Drexel University - Lebow College of Business ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
(215) 895-4920 (Phone)
(215) 895-6119 (Fax)

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