It’s not all about pay: the influence of compensation committee on say-on-pay

Karen Naaman and Michel Magnan

International Journal of Managerial Finance, 2025, vol. 21, issue 4, 1038-1060

Abstract: PurposeThis study examines whether the quality of a firm’s compensation committee influences shareholders’ say-on-pay support.Design/methodology/approachFocusing on a large sample of US Fortune 250 firms, we examine whether a high-quality compensation committee is associated with higher shareholder support for executive compensation. We utilize an aggregate measure of attributes for compensation committee quality that includes directors’ interdependencies, their tenure, holding a chief executive officer position, the number of seats they hold and committee size.FindingsResults show that high-quality compensation committees influence shareholders’ support in their say-on-pay votes. Moreover, shareholders are less likely to dissent against excessive executive compensation in the presence of a high-quality compensation committee.Originality/valueWhile policymakers have set the regulation to curb excessive executive pay through shareholders’ votes, this study reveals that factors other than the excess pay itself may influence shareholders’ perceptions. For instance, investors appear concerned with the compensation committee’s effectiveness when evaluating executive pay.

Keywords: Say-on-pay; Executive compensation; Compensation committee quality (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:ijmf-01-2024-0031

DOI: 10.1108/IJMF-01-2024-0031

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