Boards’ Response to Shareholders’ Dissatisfaction: The Case of Shareholders’ Say on Pay in the UK

Alissa, Walid

doi:10.1080/09638180.2015.1058719

Cited by 87 publications

(74 citation statements)

References 42 publications

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“…This result is robust to alternative regression specifications, and shows that large firms are "different" in Italy, in that they are subject to closer scrutiny (especially by institutional investors; see also Table 2). This finding contrasts with those emerging from the US literature (both Ertimur, Ferri & Oesch 2013 and Kimbro & Xu 2013 find a negative correlation of dissent with log market cap, used as a proxy for firm size), while the UK literature gets mixed results (Alissa 2009 andCarter &Zamora 2009 obtain a weak, negative correlation with log total assets; Conyon and Sadler (2010) find a positivethough insignificant -correlation with log market cap). Table 4 shows the results when disclosure quality is included in the analysis.…”

Section: Insert Table 3 About Herecontrasting

confidence: 54%

“…As for the effects, they find that boards respond to negatives votes by reducing excessive salary and diluting stock option grants and by improving payfor-performance sensitivity. Using a sample of the largest UK companies in the FTSE350 from 2002 to 2008, Alissa (2009) finds that shareholders" dissatisfaction is increasing in excess compensation and that boards of firms whose CEOs have above the mean excess compensation respond to dissent reducing excess compensation. Moreover, the authors find that CEOs turnover is increasing in the level of dissent.…”

Section: Related Studiesmentioning

confidence: 99%

“…Regarding the ability of a negative vote to affect the level and structure of pay packages, the available evidence is mixed. While Conyon and Sadler (2010) find little evidence that dissent materially alters the subsequent level and design of CEO pay, Alissa (2009) finds that boards reduce excess compensation for firms whose CEOs have above the mean excess compensation. Similarly, Carter and Zamora (2009) find that boards selectively respond to disapproval from shareholders by curving excess salary bonus and stock option grants.…”

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confidence: 99%

“…This relation has generally proved to be robust to alternative definitions of remuneration (e.g. as total or excess remuneration, defined as the residual from an expected compensation model that controls for standard economic determinants of compensation: Alissa 2009). …”

Section: Hypothesis 1 Shareholder Voting Dissent Is Negatively Corrementioning

confidence: 99%

“…As for the determinants, a key variable driving dissent has proved to be the level of CEO pay. Other variables that seem to be relevant are pay for performance sensitivity, the potential dilution in equity grants, firm risk and awarded perquisites (Alissa 2009;Carter & Zamora 2009;Conyon & Saldler 2010;Ertimur, Ferri & Oesch 2011;Balsam & Yin 2012;Kimbro & Xu 2013). Regarding the ability of a negative vote to affect the level and structure of pay packages, the available evidence is mixed.…”

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confidence: 99%

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Say-on-Pay in a Context of Concentrated Ownership. Evidence from Italy

Belcredi

Bozzi

Ciavarella³

et al. 2014

SSRN Journal

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We investigate say-on-pay (SOP) voting outcomes in a country (Italy) where ownership structure is concentrated by regressing shareholder dissent on a comprehensive set of independent variables (spanning from remuneration structure and disclosure to corporate governance), coming from the Italian Securities and Exchange Commission (CONSOB) and the Listed companies" industry association (Assonime-Emittenti Titoli) databases. Our main results may be summarized as follows: a) shareholder dissent in Italy is smaller, but still comparable with that found in the UK and the US, where ownership is disperse; b) dissent is negatively correlated with the equity stake held by the largest shareholder; we interpret this evidence as consistent with better monitoring and lower agency costs; c) dissent is, at best, only weakly related with company performance; however, it is positively correlated with CEO remuneration and negatively correlated with the level of disclosure, especially on the variable components of CEO pay; d) dissent is affected by investor activism at the company level, as proxied by the turnout of institutional investors at the AGM and by minority directors (a peculiar feature of Italian CG regulation) sitting on the board of target companies; e) finally, dissent is higher where shareholders" SOP vote is non-binding, implying that the nonbinding nature of the SOP vote does not reduce its effectiveness. 150, 190, 540 EFM Classification codes:

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Section: Insert Table 3 About Herecontrasting

confidence: 54%

Section: Related Studiesmentioning

confidence: 99%

mentioning

confidence: 99%

Section: Hypothesis 1 Shareholder Voting Dissent Is Negatively Corrementioning

confidence: 99%

mentioning

confidence: 99%

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Say-on-Pay in a Context of Concentrated Ownership. Evidence from Italy

Belcredi

Bozzi

Ciavarella³

et al. 2014

SSRN Journal

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An investigation of corporate directors' responses to CEO pay ratio disclosures and say‐on‐pay votes

Norman

Rose

et al. 2020

Human Resource Management

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The purpose of this study is to shed light on the effects of the CEO pay ratio and say‐on‐pay votes on directors' concerns about CEO pay equity. Investigation of the pay ratio disclosure rule offers opportunities to gain insights into whether equity perceptions associated with mandated pay ratio disclosure have significant effects on remuneration decisions in organizations. We conduct an online experiment with practicing corporate directors to examine the effects of CEO pay ratio disclosures and say‐on‐pay (SOP) votes on director decisions. Results indicate that CEO pay ratio disclosures significantly influence directors' decisions regarding executive compensation, leading directors to be less willing to increase CEO pay when the pay ratio is above the industry average pay ratio. Results also demonstrate that say‐on‐pay votes only influence directors' compensation decisions when the CEO pay ratio is above the industry average. Directors in firms with pay ratios that are above the industry average are less willing to increase CEO pay when they anticipate shareholder votes against a CEO pay increase than when they anticipate positive SOP voting outcomes. Directors in firms with CEO pay ratios that are below the industry average, however, are willing to increase CEO pay regardless of SOP voting outcomes.

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The moderating effects of CEO power and personal traits on say‐on‐pay effectiveness: Insights from the Anglo‐Saxon economies

2022

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This study investigates the efficacy of say-on-pay (SOP) regulation in mitigating excessive CEO compensation and how it is affected by CEO personal traits and the power distribution inside a corporation. Using IV-GMM method and a sample of 1,931 firms from Australia, Canada, the UK, and the USA, we find that shareholder voices are successful in reducing the pay gap between CEOs and the median employee, regardless of the exact nature of the regulation. In addition, older CEOs are associated with lower pay ratios and there are some evidences suggesting that older or female CEOs enhance SOP effectiveness.Further, power distribution manifested through corporate governance mechanisms matters, as increasing board size and director and audit committee independence reduce pay ratio. A measure of CEO power, CEO pay slice, has a significant and large positive explanatory power for the model and its exclusion can greatly exaggerate the estimated impact of SOP on pay ratio. Another measure of CEO power, CEO duality, appears to enhance the potency of SOP slightly. There is also some evidence indicating that ownership concentration enhances SOP effectiveness. Our findings have implications for companies, investors, and regulators concerning the importance of power balance structure within corporations.

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Boards’ Response to Shareholders’ Dissatisfaction: The Case of Shareholders’ Say on Pay in the UK

Cited by 87 publications

References 42 publications

Say-on-Pay in a Context of Concentrated Ownership. Evidence from Italy

Say-on-Pay in a Context of Concentrated Ownership. Evidence from Italy

An investigation of corporate directors' responses to CEO pay ratio disclosures and say‐on‐pay votes

The moderating effects of CEO power and personal traits on say‐on‐pay effectiveness: Insights from the Anglo‐Saxon economies

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