67 Pages Posted: 24 Nov 2013 Last revised: 19 Nov 2016
Date Written: November 18, 2016
We examine if shareholder scrutiny affects how companies set the structure and level of their top executives’ compensation. We exploit a feature of recent U.S. regulation on “advisory votes on compensation” (often called “say-on-pay”), which resulted in time-varying scrutiny on pay in the form of a periodic voting pattern for some firms. Specifically, our identification strategy relies on within-firm variation among companies that elected to hold votes every two or three years and thus are subject to a predictable cyclical voting schedule. We find that in years when faced with a vote, firms reduce salaries and golden parachutes to CEOs, but increase equity pay and pensions. On net, total pay is higher. Overall, our results show that the heightened scrutiny on firms when they hold votes matters, and has a significant influence on managerial compensation.
Keywords: Executive compensation, scrutiny, shareholders, say on pay, CEOs, Dodd-Frank, shareholder voice
Suggested Citation: Suggested Citation
Kronlund, Mathias and Sandy, Shastri, Does Shareholder Scrutiny Affect Executive Compensation? (November 18, 2016). Available at SSRN: https://ssrn.com/abstract=2358696 or http://dx.doi.org/10.2139/ssrn.2358696
By Alex Edmans
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