Say Pays! Shareholder Voice and Firm Performance
Upjohn Institute Working Paper No. 13-192
49 Pages Posted: 28 Mar 2013 Last revised: 3 Nov 2014
Date Written: February 27, 2013
This paper estimates the effects of Say-on-Pay (SoP); a policy that increases shareholder “voice” by providing shareholders with a regular vote on executive pay. We apply a regression discontinuity design to the votes on shareholder-sponsored SoP proposals. Adopting SoP leads to large increases in market value (4.6%) and to improvements in long-term performance: profitability and labor productivity increase, while overheads and investment fall. In contrast, we find limited effects on pay levels and structure. This suggests that SoP operates as a regular vote of confidence, increasing efficiency and market value.
Keywords: Say-on-Pay, Shareholder Voice, Executive Compensation, Firm Performance, Governance
JEL Classification: G34, L20, M12
Suggested Citation: Suggested Citation