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

See all articles by Fabrizio Ferri

Fabrizio Ferri

University of Miami - Miami Business School; European Corporate Governance Institute

David A. Maber

California Polytechnic State University

Date Written: November 24, 2011

Abstract

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

Ferri, Fabrizio and Maber, David A., Say on Pay Votes and CEO Compensation: Evidence from the UK (November 24, 2011). Review of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1420394

Fabrizio Ferri (Contact Author)

University of Miami - Miami Business School ( email )

Coral Gables, FL 33146-6531
United States

European Corporate Governance Institute ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

David A. Maber

California Polytechnic State University ( email )

San Luis Obispo, CA
United States

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