"Say on pay" regulation and chief executive officer pay: Evidence from Australia

Abstract

We investigate the consequences of Australia’s ‘say on pay’ regulation on the chief executive officer (CEO) compensation using recent data. We find that, for the ‘first-strike’ firms that avoided a ‘second strike’ (the treatment firms), a reduction in CEO total remuneration is positively associated with a lower level of shareholder dissent votes on the following remuneration report. We also find that, unlike control firms, the treatment firms increased the proportion of CEO’s performance-based pay in the year following the ‘first strike’ and such an increase is negatively related to a change in shareholders’ dissent level. Further, detailed descriptive analysis suggests that the ‘first-strike’ firms made relatively more frequent and larger pay reductions by reducing the level of pay in one or more components of the CEO pay