The Efficacy of Shareholder Voting: Evidence from Equity Compensation Plans
Journal of Accounting Research, Vol. 51, No. 5, 2013
Posted: 28 Nov 2013
Date Written: November 26, 2013
This study examines the effects of shareholder support for equity compensation plans on subsequent chief executive officer (CEO) compensation. Using cross-sectional regression, instrumental variable, and regression discontinuity research designs, we find little evidence that either lower shareholder voting support for, or outright rejection of, proposed equity compensation plans leads to decreases in the level or composition of future CEO incentive-compensation. We also find that in cases where the equity compensation plan is rejected by shareholders, firms are more likely to propose, and shareholders are more likely to approve, a plan the following year. Our results suggest that shareholder votes have little substantive impact on firms’ incentive-compensation policies. Thus, recent regulatory efforts aimed at strengthening shareholder voting rights, particularly in the context of executive compensation, may have limited effect on firms’ compensation policies.
Keywords: executive compensation, equity-based compensation, shareholder voting
Suggested Citation: Suggested Citation