Say-on-Pay Judgments: The Two-Strikes Rule and the Pay-Performance Link

Abstract

We undertake an experiment to explore shareholder voting behavior when the pay-performance link is weak or strong; and when there has (has not) been a first strike in the preceding year. We find shareholders are more supportive of a remuneration package evidencing a strong pay-performance link than a weak link. Further, shareholders are less supportive of a remuneration package when there has been a first strike in the preceding year than when there has not been a first strike. Importantly, we find that a first strike reduces the effect of the pay-performance link on voting intentions.

Keywords: say-on-pay; pay-performance link; executive remuneration; two-strikes rule