Shareholder Voting and Directors’ Remuneration Report Legislation: Say on Pay in the UK

40 Pages Posted: 20 Aug 2009

See all articles by Martin J. Conyon

Martin J. Conyon

Bentley University; Wharton School, Center for Human Resources

Graham Sadler

Coventry University

Date Written: August 19, 2009

Abstract

This paper investigates shareholder voting in the UK. The Directors’ Remuneration Report (DRR) Regulations of 2002 gave shareholders a mandatory non-binding vote on boardroom pay. First, using data on about 50,000 resolutions over the period 2002 to 2007 we find that less than 10% of shareholders abstain or vote against the mandated Directors’ Remuneration Report (DRR) resolution. Second, investors are more likely to vote against DRR resolutions compared to non-pay resolutions. Third, shareholders are more likely to vote against general executive pay resolutions, such as stock options, long-term incentive plans and bonus resolutions compared to non-pay resolutions. Forth, firms with higher CEO pay attract greater voting dissent. Fifth, there is little evidence that CEO pay is lower in firms that previously experienced high levels of shareholder dissent. In addition, there is little evidence that the equity pay-mix, representing better owner-manager alignment, is greater in such firms. Currently, we find limited evidence that, on average, ‘say on pay’ materially alters the subsequent level and design of CEO compensation.

Keywords: Say on Pay, CEO pay, Shareholder voting

JEL Classification: G35

Suggested Citation

Conyon, Martin J. and Sadler, Graham, Shareholder Voting and Directors’ Remuneration Report Legislation: Say on Pay in the UK (August 19, 2009). AAA 2010 Management Accounting Section (MAS) Meeting Paper, Available at SSRN: https://ssrn.com/abstract=1457921 or http://dx.doi.org/10.2139/ssrn.1457921

Martin J. Conyon (Contact Author)

Bentley University ( email )

175 Forest Street
Waltham, MA 02145
United States

Wharton School, Center for Human Resources ( email )

3600 Locust Walk
Philadelphia, PA 19104-6365
United States

Graham Sadler

Coventry University ( email )

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