Shareholder Votes and Proxy Advisors: Evidence from Say on Pay

68 Pages Posted: 11 Mar 2012 Last revised: 16 Nov 2013

See all articles by Yonca Ertimur

Yonca Ertimur

University of Colorado at Boulder - Department of Accounting

Fabrizio Ferri

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

David Oesch

University of Zurich

Multiple version iconThere are 2 versions of this paper

Date Written: August 2, 2013


We investigate the economic role of proxy advisors (PA) in the context of mandatory “say on pay” votes, a novel and complex item requiring significant firm-specific analysis. PA are more likely to issue an Against recommendation at firms with poor performance and higher levels of CEO pay and do not appear to follow a “one-size-fits-all” approach. PA recommendations are the key determinant of voting outcome but the sensitivity of shareholder votes to these recommendations varies with the institutional ownership structure, and the rationale behind the recommendation, suggesting that at least some shareholders do not blindly follow these recommendations. More than half of the firms respond to the adverse shareholder vote triggered by a negative recommendation by engaging with investors and making changes to their compensation plan. However, we find no market reaction to the announcement of such changes, even when material enough to result in a favorable recommendation and vote the following year. Our findings suggest that, rather than identifying and promoting superior compensation practices, PA’s key economic role is processing a substantial amount of executive pay information on behalf of institutional investors, hence reducing their cost of making informed voting decisions. Our findings contribute to the literature on shareholder voting and the related policy debate.

Keywords: Say on pay, proxy advisors, shareholder votes, CEO compensation, shareholder activism

JEL Classification: G34, G38, J33, M12

Suggested Citation

Ertimur, Yonca and Ferri, Fabrizio and Oesch, David, Shareholder Votes and Proxy Advisors: Evidence from Say on Pay (August 2, 2013). Journal of Accounting Research, Forthcoming, Available at SSRN: or

Yonca Ertimur

University of Colorado at Boulder - Department of Accounting ( email )

419 UCB
Boulder, CO 80309-0419
United States

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

David Oesch

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006

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