Proxy Voting on CEO Pay: Evidence from Rejection of the Inevitable Disclosure Doctrine

2022 AsianFA conference, 2022 JIAR conference

59 Pages Posted: 28 Mar 2022 Last revised: 7 Sep 2022

See all articles by Xiaohui LI

Xiaohui LI

Hong Kong Polytechnic University

Yao Shen

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Jing Xie

University of Macau, Faculty of Business Administration, Department of Finance and Business Economics

Date Written: May 27, 2022

Abstract

We document that the percentage of dissenting votes against management-sponsored compensation proposals increases following improvement in CEO job mobility. We exploit the staggered rejection of the Inevitable Disclosure Doctrine (RIDD) by US state courts as an exogenous increase in CEOs’ job mobility. Consistent with the rent extraction view, this effect is stronger for firms with poor performance, overpaid CEOs, and weak corporate governance. Proxy advisor issues more negative voting recommendations and smaller mutual fund families (possessing weaker active voting incentive) dissent more against these proposals after RIDD. Additional evidence shows that dissenting votes limit growth in CEO pay after RIDD.

Keywords: Proxy Voting; Executive Compensation; Labor Market; Inevitable Disclosure Doctrine; Proxy Advisor

JEL Classification: G30, G34, J33, M12

Suggested Citation

LI, Xiaohui and Shen, Yao and Xie, Jing, Proxy Voting on CEO Pay: Evidence from Rejection of the Inevitable Disclosure Doctrine (May 27, 2022). 2022 AsianFA conference, 2022 JIAR conference, Available at SSRN: https://ssrn.com/abstract=4045698 or http://dx.doi.org/10.2139/ssrn.4045698

Xiaohui LI

Hong Kong Polytechnic University ( email )

Yao Shen

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

55 Lexington Ave
New York, NY 10010
United States

Jing Xie (Contact Author)

University of Macau, Faculty of Business Administration, Department of Finance and Business Economics ( email )

E22-4064, FBA building
Macau
Macau, 000000
China
+853 88224639 (Phone)

HOME PAGE: http://fba.um.edu.mo/faculty/jingxie/

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