Passive Institution and Long-Run CEO Compensation: Evidence from proxy voting

59 Pages Posted: 8 Jan 2020 Last revised: 6 Mar 2024

See all articles by In Ji Jang

In Ji Jang

Bentley University - Department of Finance

Date Written: December 31, 2018

Abstract

A one-standard-deviation increase in passive ownership leads to a 0.46-standard-deviation increase in the compensation duration. I find proxy voting is the channel through which passive investors affect incentive horizons. Since the passage of the Dodd-Frank Act, passive funds tend to vote more against Say-on-Pay (SOP) proposals, and SOP proposals are less likely to pass with higher passive ownership. Moreover, passive ownership is associated with a greater number of shareholder-sponsored compensation proposals and an increased likelihood of these proposals passing. The overall findings indicate that passive institutions work to lengthen CEO compensation to align incentive horizons, and proxy voting is the mechanism through which they exert influence

Keywords: Passive funds, proxy voting, compensation duration, incentive horizon

JEL Classification: G23, G32, G34, M12

Suggested Citation

Jang, In Ji, Passive Institution and Long-Run CEO Compensation: Evidence from proxy voting (December 31, 2018). Available at SSRN: https://ssrn.com/abstract=3422134 or http://dx.doi.org/10.2139/ssrn.3422134

In Ji Jang (Contact Author)

Bentley University - Department of Finance ( email )

175 Forest Street
Waltham, MA 02154
United States

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