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The First Year of 'Say on Pay' Under Dodd-Frank: An Empirical Analysis and Look Forward

46 Pages Posted: 19 Oct 2012 Last revised: 10 May 2013

James F. Cotter

Wake Forest University School of Business

Alan R. Palmiter

Wake Forest University - School of Law

Randall S. Thomas

Vanderbilt University - Law School; European Corporate Governance Institute (ECGI)

Date Written: February 17, 2013


Using voting data from the first year of “say on pay” votes under Dodd-Frank, we look at the patterns of shareholder voting in advisory votes on executive pay. Consistent with the more limited “say on pay” voting before Dodd-Frank, we find that shareholders in the first year under Dodd-Frank gave generally broad support to management pay packages. But not all pay packages received strong shareholder support. At some companies, management suffered the embarrassment of failed “say on pay” votes – that is, less than 50% of their company’s shareholders voted in favor of the proposal. In particular, we find that poorly-performing companies with high levels of “excess” executive pay, low total shareholder return, and negative ISS voting recommendations experienced greater shareholder “against” votes than at other firms.

Although “say on pay” votes are non-binding and corporate boards need not take action even if the proposal fails, most companies receiving negative ISS recommendations or experiencing low levels of “say on pay” support undertook additional communication with shareholders or made changes to their pay practices – reflecting a shift in the management-shareholder dynamic. During 2012, the second year of “say on pay” under Dodd-Frank, we find similar patterns, with companies responding proactively to an unfavorable ISS recommendation or a prior failed (or even weak) “say on pay” vote in 2011. We use four case studies to illustrate this new corporate governance dynamic, which we view as an important consequence of the Dodd-Frank Act.

Keywords: Say on Pay, Dodd-Frank, Empirical, ISS

Suggested Citation

Cotter, James F. and Palmiter, Alan R. and Thomas, Randall S., The First Year of 'Say on Pay' Under Dodd-Frank: An Empirical Analysis and Look Forward (February 17, 2013). George Washington Law Review, Vol. 81, No. 3, 2013; Vanderbilt Law and Economics Research Paper No. 12-32; Wake Forest Univ. Legal Studies Paper No. 2220259. Available at SSRN: or

James Cotter

Wake Forest University School of Business ( email )

Farrell Hall 384
P.O. Box 7659
Winston-Salem, NC 27109-7659
United States
336-758-7220 (Phone)

Alan Palmiter

Wake Forest University - School of Law ( email )

P.O. Box 7206
Winston-Salem, NC 27109
United States
336-758-5711 (Phone)
336-758-4496 (Fax)

Randall Thomas (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

European Corporate Governance Institute (ECGI)

B-1050 Brussels

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