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Shareholder Activism and CEO Pay

Yonca Ertimur¹; Fabrizio Ferri²; Volkan Muslu³

¹ Duke University · ² Stern School of Business, NYU · ³ University of Texas at Dallas

We study 134 vote-no campaigns and 1,198 shareholder proposals related to executive pay between 1997 and 2007. Union pension funds sponsor most of these initiatives, yet their targeting criteria do not appear to reflect labor-related motives. Shareholders favor proposals related to the pay-setting process (e.g., subject severance pay to shareholder approval) over proposals that micromanage pay level or structure. While activists target firms with high CEO pay (whether excessive or not), voting support is higher only at firms with excess CEO pay. Firms with excess CEO pay targeted by vote-no campaigns experience a significant reduction in CEO pay ($7.3 million). Our findings contribute to the debate on “say on pay” and other reforms empowering shareholders.

DOI

10.1093/rfs/hhq113

Volume

24 (2)

Pages

535-592

Language

en

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BibTeX

Sources

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