Say on Pay Laws, Executive Compensation, Pay Slice, and Firm Valuation around the World
57 Pages Posted: 28 Apr 2014 Last revised: 17 Aug 2016
Date Written: January 20, 2016
Using a large sample of firms from 38 countries over the 2001-2012 period, we find evidence that following say on pay (SoP) laws, CEO pay growth rates decline and the sensitivity of CEO pay to firm performance improves. These changes are mostly concentrated on firms with high excess pay and shareholder dissent, long CEO tenure, and busy and less independent boards as of the period prior to the adoption of SoP laws. Further, the portion of total top management pay captured by CEOs is lower in the post-SoP period, which is associated with higher firm valuations. Overall, these results suggest that SoP laws are associated with significant changes in CEO pay policies.
Keywords: Executive compensation, say on pay laws, regulations, CEO pay slice, corporate governance, firm valuation, international.
JEL Classification: G15, G34, G38, M12
Suggested Citation: Suggested Citation