Voluntary Performance Disclosures in the CD&A

60 Pages Posted: 18 Feb 2021 Last revised: 2 Mar 2023

See all articles by Heidi A. Packard

Heidi A. Packard

University of Michigan at Ann Arbor - Accounting

Andrea Pawliczek

University of Colorado at Boulder

A. Nicole Skinner

University of Colorado at Boulder

Date Written: March 1, 2023

Abstract

This paper examines voluntary disclosure in the context of shareholder scrutiny of executive compensation contracts. We find that firms voluntarily increase discussion of their performance within their CD&A disclosures when peer-benchmarked compensation relative to performance is high. In contrast, we do not find a similar increase in performance discussion in the corresponding MD&A disclosures, which suggests that the effect is not driven by firms’ general disclosure practices. We also find that the relation between relatively high compensation and CD&A performance disclosure strengthens following the implementation of mandatory Say-on-Pay, which increased costs associated with investor criticism of pay. These disclosures appear to be used effectively to avoid negative compensation assessments, in that they are associated with higher levels of shareholder and proxy advisor approval. Altogether, our findings suggest that CD&A performance disclosures allow firms to communicate the context of their compensation choices to improve shareholder opinions of pay.

Keywords: Proxy statement disclosure, CD&A disclosure, shareholder scrutiny, voluntary disclosure

JEL Classification: D22, J33, M41

Suggested Citation

Packard, Heidi A. and Pawliczek, Andrea and Skinner, Ashley Nicole, Voluntary Performance Disclosures in the CD&A (March 1, 2023). Available at SSRN: https://ssrn.com/abstract=3776925 or http://dx.doi.org/10.2139/ssrn.3776925

Heidi A. Packard (Contact Author)

University of Michigan at Ann Arbor - Accounting ( email )

701 Tappan Street
Ann Arbor, MI 48109-1234
United States

Andrea Pawliczek

University of Colorado at Boulder ( email )

1070 Edinboro Drive
Boulder, CO CO 80309
United States

Ashley Nicole Skinner

University of Colorado at Boulder ( email )

256 UCB
Boulder, CO CO 80300-0256
United States

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