Non-Mandatory Say on Pay Votes and AGM Participation: Evidence from Germany

Abstract

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Say-on-Pay: Is Anybody Listening?

“…Rapp, Sperling and Wolff (2010) and Eulerich, Rapp and Wolff (2012) investigate Germany's law permitting non-binding shareholder-initiated votes and find that a firm's chance of being targeted increases with a higher free float and strong media exposure, whereas the approval rate increases with the voting power of blockholders and the introduction of a new compensation system. For 2010-2013, Powell and Rapp (2015) find that half of all German firms opted for having a vote in the first four years of the voluntary regime, and the likelihood of a vote increases with firm size, abnormal executive compensation, and free float. They also find a strong pay-performance link, especially when the effect of executive compensation is lagged over the years following the vote.…”

Corporate Governance in Germany: Recent Developments and Challenges

“…For instance, the German regulator enacted a voluntary, non-binding say-on-pay regime. 55 Also, the BaFin (the Federal Financial Supervisory Authority) is seen to put emphasis on institutional investors fulfilling their fiduciary duties in terms of voting and engagement. Finally, the Shareholder Rights Directive of the EU, and the increased importance of investor governance included in the 2015 update of the OECD Governance Principles, should also see stronger engagement activity by shareholders.…”