Shareholders’ Say on Pay: Does It Create Value?
Congress and activists recently proposed giving shareholders a say (vote) on executive pay. We find that when the House passed the Say-on-Pay Bill, the market reaction was significantly positive for firms with high abnormal chief executive officer (CEO) compensation, with low pay-for-performance sensitivity, and responsive to shareholder pressure. However, activist-sponsored say-on-pay proposals target large firms, not those with excessive CEO pay, poor governance, or poor performance. The market reacts negatively to labor-sponsored proposal announcements and positively when these proposals are defeated. Our findings suggest that say-on-pay creates value for companies with inefficient compensation but can destroy value for others.
Year of publication: |
2011
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Authors: | Cai, Jie ; Walkling, Ralph A. |
Published in: |
Journal of Financial and Quantitative Analysis. - Cambridge University Press. - Vol. 46.2011, 02, p. 299-339
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Publisher: |
Cambridge University Press |
Description of contents: | Abstract [journals.cambridge.org] |
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