Say on Pay Votes and CEO Compensation: Evidence from the UK
Review of Finance, Forthcoming
62 Pages Posted: 26 Apr 2010 Last revised: 25 Nov 2011
Date Written: November 24, 2011
We examine the effect of say on pay regulation in the United Kingdom (UK). Consistent with the view that shareholders regard say on pay as a value-creating mechanism, the regulation’s announcement triggered a positive stock price reaction at firms with weak penalties for poor performance. UK firms responded to negative say on pay voting outcomes by removing controversial CEO pay practices criticized as rewards for failure (e.g., generous severance contracts) and increasing the sensitivity of pay to poor realizations of performance.
Keywords: say on pay, shareholder votes, CEO compensation, shareholder activism
JEL Classification: G34, G38, J33, M12
Suggested Citation: Suggested Citation