Does “Say on Pay†Work? Evidence from Forced CEO Turnover and Compensation Committee Members Turnover

Wikil Kwak, Xiaoyan Cheng (), Xiao Song () and Huishan Wan ()
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Wikil Kwak: School of Accounting, University of Nebraska Omaha, Omaha, NE 68182, USA
Xiaoyan Cheng: School of Accounting, University of Nebraska Omaha, Omaha, NE 68182, USA
Xiao Song: School of Accounting, University of Nebraska Omaha, Omaha, NE 68182, USA
Huishan Wan: Department of Accounting, University of Northern Iowa, Iowa 50614, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2025, vol. 28, issue 03, 1-50

Abstract: This study examines the effectiveness of shareholders’ “Say on Pay†(SOP) votes in prompting board responsiveness. Using shareholders’ SOP votes between 2011 and 2016, we find that firms with greater dissent votes are more likely to experience subsequent forced CEO turnover and compensation committee members (CCMs) turnover. We also find that the relationship between SOP dissent votes and subsequent forced CEO turnover and CCM turnover is strengthened in firms with a high level of dedicated institutional ownership, but not in firms with high transient institutional ownership. These findings reveal that dedicated institutional ownership is a channel through which the disciplinary mechanism of SOP votes becomes more visible. Overall, our study provides evidence that SOP votes serve as an effective corporate governance mechanism.

Keywords: CEO compensation; say on pay; forced CEO turnover; compensation committee members turnover; institutional ownership (search for similar items in EconPapers)
JEL-codes: G30 G38 M12 M48 M52 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1142/S0219091525500183

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