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Disclosure, Shareholder Oversight and the Pay-Performance Link

41 Pages Posted: 26 Apr 2011  

Peter Clarkson

University of Queensland - Business School; Simon Fraser University (SFU) - Beedie School of Business; Financial Research Network (FIRN)

Julie K. Walker

University of Queensland - Business School

Shannon Nicholls

Morgan Stanley

Date Written: April 26, 2011

Abstract

This paper investigates the effect of increased shareholder oversight and disclosure about executive remuneration on the pay-performance relation, while controlling for contemporaneous changes in corporate governance practice. Our sample consists of 240 ASX-listed firms with annual reports available for each year over the period 2001-2009, a period which straddles the period of regulatory change. We initially document the conjectured improvements in remuneration disclosure and shareholder oversight, in the form of the advisory vote on the remuneration report. Following, we find, as predicted, a general strengthening of the pay-performance relation over the study period, with the increased sensitivity of reported CEO remuneration to firm performance being primarily related to enhanced remuneration disclosure and the non-binding shareholder vote on the remuneration report. Our results lead us to conclude that enhanced oversight over the executive remuneration process brought about by regulatory change has positively impacted the executive remuneration process by strengthening the pay-performance relation and making the process appear more accountable.

Keywords: CEO Remuneration, Pay-Performance Sensitivity, Remuneration Disclosure, Shareholder Remuneration Vote

JEL Classification: M41

Suggested Citation

Clarkson, Peter and Walker, Julie K. and Nicholls, Shannon, Disclosure, Shareholder Oversight and the Pay-Performance Link (April 26, 2011). Available at SSRN: https://ssrn.com/abstract=1823804 or http://dx.doi.org/10.2139/ssrn.1823804

Peter Clarkson (Contact Author)

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Julie K. Walker

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Shannon Nicholls

Morgan Stanley ( email )

1585 Broadway
New York, NY 10036
United States

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