CEO-To-Worker Pay Ratio, Say On Pay Votes, and Executive Compensation

2021 ◽  
Vol 2021 (1) ◽  
pp. 12466
Author(s):  
Etienne Develay ◽  
Yan Wang ◽  
Stephanie Giamporcaro
Keyword(s):  
Executive Compensation ◽  
Say On Pay

Managerial discretion, say on pay, and CEO compensation

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
J. Samuel Baixauli-Soler ◽  
Gabriel Lozano-Reina ◽  
Gregorio Sánchez-Marín
Keyword(s):  
Executive Compensation ◽  
Ceo Compensation ◽  
Managerial Discretion ◽  
Governance Mechanism ◽  
Global Effect ◽  
Content Type ◽  
Say On Pay ◽  
Negative Effect ◽  
High Level ◽  
The Impact

PurposeThe purpose of this paper is to analyze the influence of managerial discretion on the effectiveness of say on pay (SOP) as a governance mechanism. This goal covers an important gap since the issue of how effective SOP is in promoting more aligned compensation has proved somewhat controversial.Design/methodology/approachThis empirical research opted for a panel methodology for the period 2003–2017, using a sample of large UK listed-companies (specifically, 3,445 firm-year observations). Data were obtained from several sources (Manifest Ltd, BoardEx, Worldscope, Factset Ownership and DataStream).FindingsResults show that managerial discretion plays an important role in the effectiveness of SOP as a mechanism for increasing aligned CEO compensation. While individual discretion (latitude of objectives) exerts a negative effect, contextual discretion (latitude of action) increases SOP effectiveness. The global effect of managerial discretion is positive when there is high level of both individual and contextual discretion.Originality/valueThis empirical study provides evidence concerning an emerging topic in the literature regarding the impact of SOP as a shareholder activism mechanism of corporate governance on executive compensation. By taking managerial discretion into consideration as a relevant moderating factor, it also offers a better explanation of SOP effectiveness as a governance mechanism.

scholarly journals Dealing with Overleverage: Restricting Leverage vs. Restricting Variable Compensation

2018 ◽  
Vol 08 (01) ◽  
pp. 1850001 ◽  
Author(s):  
Pedro Gete ◽  
Juan-Pedro Gómez
Keyword(s):  
Executive Compensation ◽  
Asset Prices ◽  
Market Failure ◽  
Say On Pay ◽  
Compensation Packages ◽  
Firm Leverage ◽  
The Right

We study policies that regulate executive compensation in a model that jointly determines executives’ effort, compensation and firm leverage. The market failure that justifies regulation is that executives are optimistic about asset prices in states of distress. We show that shareholders propose compensation packages that lead to socially excessive leverage. Say-on-pay regulation does not reduce the incentives for leverage. Regulating the structure of compensation (but not its level) with a cap on the ratio of variable-to-fixed pay delivers the right leverage. However, it is more efficient to directly regulate leverage because restricting the variable compensation impacts managerial effort more than if shareholders are free to design compensation subject to a leverage constraint.

Do Directors Suffer External Consequences for Poor Oversight of Executive Compensation? Evidence from Say-on-Pay Votes

2016 ◽  
Author(s):  
Kelly R. Brunarski ◽  
Timothy Colin Campbell ◽  
Yvette S. Harman ◽  
Mary Elizabeth Thompson
Keyword(s):  
Executive Compensation ◽  
Say On Pay

scholarly journals The Influence of ‘Say on Pay’ on Excessive Executive Compensation in the UK and the US

2021 ◽  
Vol 14 (4) ◽  
pp. 71
Author(s):  
Zhe Wang ◽  
Yunjie Wu
Keyword(s):  
Executive Compensation ◽  
Corporate Law ◽  
Ongoing Debate ◽  
Income Gap ◽  
Say On Pay ◽  
Executive Remuneration ◽  
The Us ◽  
Core Issue ◽  
The Uk ◽  
And Control

Along with the separation of ownership and control in modern companies, the agency problem between shareholders and managers has become a core issue in corporate law. In recent decades, there was a trend of increasing executive compensation in many countries, which led to shareholders’ dissatisfaction and social concerns about the income gap. Since directors did not effectively solve the problem of excessive executive remuneration, many countries introduced the advisory shareholder vote on the remuneration report (‘Say on Pay’). It is a new mechanism that allows shareholders to vote on executive remuneration. After it was first introduced in the UK, many other countries including the US adopted ‘Say on Pay’ to relieve the problem of excessive executive remuneration. However, there is an ongoing debate about whether ‘Say on Pay’ has a meaningful influence on excessive executive compensation. Some believe that shareholder voting results lead directors to create better executive remuneration plans. Others argue that ‘Say on Pay’ contributes little to solving this problem. It is therefore essential to analyse the effects of ‘Say on Pay’ on solving the excessive executive remuneration problem in the UK and the US. This essay will analyse several arguments related to the influence of ‘Say on Pay’ on excessive executive compensation in order to demonstrate the reasons why ‘Say on Pay’ contributes little to solving the excessive executive remuneration problem in the UK and the US.

scholarly journals What does the market say about say-on-pay? A look at the Canadian bank experience

2012 ◽  
Vol 1 (3) ◽  
pp. 142-155 ◽  
Author(s):  
Kim Trottier
Keyword(s):  
Executive Compensation ◽  
Event Study ◽  
Economic Benefits ◽  
Share Price ◽  
Price Reaction ◽  
Say On Pay ◽  
News Announcement ◽  
Study Methodology ◽  
Event Study Methodology

This paper explores the share price reaction to a recent news announcement that Canadian banks were adopting say-on-pay, a policy that gives shareholders an annual non-binding vote on executive compensation. Using event study methodology, the effect of adopting this new policy is explored and found to be associated with a significant increase in share price. This result suggests that giving shareholders a voice on executive compensation is expected to generate economic benefits, which adds to the paucity of knowledge currently available to shareholders and legislators as they consider the consequences of say-on-pay.

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