Journal of Financial and Quantitative Analysis Vol. 46 No. 2 2011
Shareholders’ Say on Pay: Does It Create Value?
Abstract
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.
- DOI
- 10.1017/s0022109010000803
- Volume
- 46
- Issue
- 2
- Pages
- 299-339
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref