Changing board behaviour: The role of the ‘Two Strikes’ rule in improving the efficacy of Australian Say‐on‐Pay

James Borthwick, Aelee Jun and Shiguang Ma

Accounting and Finance, 2020, vol. 60, issue S1, 827-876

Abstract: This article analyses whether the transition from the 2004 CLERP 9 advisory Say‐on‐Pay regime to the ‘Two Strikes’ rule in 2012 influenced CEO pay in Australian firms. Analysing a panel of 2,074 firm‐years (2005–2015), we find that (i) CEO pay is a positive predictor of shareholder dissent; (ii) firm performance has a reducing effect on shareholder dissent; (iii) excessive shareholder dissent moderated CEO pay under the ‘Two Strikes’ rule relative to the CLERP 9 regime, and (iv) the market responded favourably to the introduction of the ‘Two Strikes’ rule and negatively to ‘strike’ instances after its introduction.

Date: 2020
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