Does Say on Pay Matter? Evidence from Say-on-Pay Proposals in the United States
38 Pages Posted: 25 Feb 2010 Last revised: 24 Apr 2012
Date Written: May 1, 2010
We investigate the effect of say-on-pay (SOP) proposals on changes in executive and director compensation. Relative to non-SOP firms, SOP firms’ total compensation to CEOs does not significantly change after the proposal. Although the total compensation does not change, the mix of compensation does change – companies move away from using cash compensation toward more incentive compensation, offsetting the reduction in bonus. Further, the mix of compensation of non-CEO executives changes similarly to that of CEOs. Compensation to directors of SOP firms increases significantly less than non-SOP firms’. Firms whose CEOs are well compensated, especially with cash-based compensation, are most likely to receive a proposal.
Keywords: Say on Pay, Compensation, Shareholder activism
JEL Classification: G3, G34, G38, K22
Suggested Citation: Suggested Citation