Say-on-Pay and Shareholder Value: The Tension between Agency and Hold-up
Swiss Finance Institute Research Paper No. 11-12
European Corporate Governance Institute (ECGI) - Finance Working Paper No. 500/2017
47 Pages Posted: 26 Mar 2011 Last revised: 17 Jan 2023
Date Written: December 21, 2022
Abstract
A set of policy experiments regarding binding say-on-pay votes in Switzerland suggests
that shareholders may prefer to have limits set on their own power. The stock price reactions
indicate a trade-off: On the one hand, binding votes on executive compensation
amounts enhance the alignment of management interests with those of the shareholders,
reducing agency costs. On the other hand, when shareholders have the power to
(partially) set pay levels retrospectively, it may increase hold-up problems by distorting
executives’ incentives to make extra-contractual, firm-specific investments. These findings
have implications for the design of policy.
Keywords: say-on-pay, event study, corporate governance, executive compensation
JEL Classification: G38, G34
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Corporate Governance and Shareholder Initiatives: Empirical Evidence
By Jonathan M. Karpoff, Paul H. Malatesta, ...
-
The Impact of Shareholder Activism on Target Companies: A Survey of Empirical Findings
-
Shareholder Activism and Corporate Governance in the United States
-
Monitoring: Which Institutions Matter?
By Kai Li, Jarrad Harford, ...
-
Hedge Fund Activism, Corporate Governance, and Firm Performance
-
By Tim C. Opler and Jonathan S. Sokobin
-
The Evolution of Shareholder Activism in the United States
By Stuart Gillan and Laura T. Starks