Abstract
The Dodd Frank Act (2010) empowered shareholders by mandating non-binding voting on executive compensation. This paper investigates the determinants of shareholder dissent on the say-on-pay proposal. Data on S&P1500 firms between 2010 and 2012 reveal various findings. First, fewer than 3% of firms failed to pass their say-on-pay proposals. Second, shareholder dissent on say-on-pay is higher in firms where CEO compensation is high or 'excessive', consistent with agency theory. Third, shareholder dissent is higher in firms with poor performance, measured by stock-market or accounting returns. Fourth, there is less dissent on say-on-pay in firms with better quality boardroom governance (e.g. the presence of a non-CEO lead director or hiring a major compensation consultant). Lastly, difference-in-difference estimates show that the growth in CEO pay is lower in firms that previously attracted high levels of dissent on say-on-pay.
Published Version
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