Boards' Response to Shareholders' Dissatisfaction: The Case of Shareholders' Say on Pay in the UK

Walid Alissa
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Walid Alissa: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

Working Papers from HAL

Abstract: In the United Kingdom, a recently adopted regulation provides shareholders the opportunity to cast non-binding (advisory) votes on firms' compensation reports during annual meetings (i.e., ‘Say-on-Pay'). This study examines how the regulation affected the behavior of shareholders and boards. I find evidence that shareholders use the vote to convey their dissatisfaction with excessive executive compensation practices. In addition, I find evidence that boards respond to shareholders' dissatisfaction by: (1) reducing the excessiveness of CEO compensation for firms whose CEOs have above average excess compensation; or (2) forcing the CEO out of office. These findings provide evidence of ‘Say-on-Pay' regulation playing a role in firms' corporate governance.

Keywords: Executive compensation; Say-on-Pay; shareholders' vote; dissatisfaction (search for similar items in EconPapers)
Date: 2010-05-01
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Published in 2010

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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-00511789

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