Say on Pay Votes and CEO Compensation: Evidence from the UK

Fabrizio Ferri and David A. Maber

Review of Finance, 2013, vol. 17, issue 2, 527-563

Abstract: We examine the effect of say on pay regulation in the UK. Consistent with the view that shareholders regard say on pay as a value-creating mechanism, the regulation's announcement triggered a positive stock price reaction at firms with weak penalties for poor performance. UK firms responded to negative say on pay voting outcomes by removing controversial CEO pay practices criticized as rewards for failure (e.g., generous severance contracts) and increasing the sensitivity of pay to poor realizations of performance. Copyright 2013, Oxford University Press.

Date: 2013
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