“Say on Pay”: A Wolf in Sheep's Clothing?

Mangen, Claudine; Magnan, Michel

doi:10.5465/amp.2010.0098

Cited by 42 publications

(39 citation statements)

References 128 publications

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“…Outside shareholders' dissent on remuneration resolutions may cause 'outrage' (Bebchuk et al, 2002;Mangen & Magnan, 2012). Proposals on directors' remuneration at the shareholders' meeting will draw remuneration to the attention of the shareholders.…”

Section: H3d: the Extent Of Voluntary Disclosure Of Directors' Remunementioning

confidence: 99%

“…However, this limitation is common to the whole disclosure literature (e.g., Palepu & Healy, 2001;Bassett et al, 2007; Teixeira Lopes & Lima Rodrigues, 2007; Patelli & Prencipe, 2007, Liu & Taylor, 2008Laksmana et al, 2012). Last, but not least, our study focused on the level of disclosure provided by firms, but not whether (and how) firms 'managed' remuneration disclosures, through impression management techniques (Laksmana et al, 2012;Mangen & Magnan, 2012). Further comparative research might address this issue.…”

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confidence: 99%

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Directors' remuneration: A comparison of Italian and UK non-financial listed firms' disclosure

Melis

Gaia

Carta

2015

The British Accounting Review

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Abstract:Directors' remuneration is a key issue for both academics and policymakers. It has caused enormous controversy in recent years. This study uses a comprehensive index to analyse the disclosure of directors' remuneration in Italian and UK listed firms. It finds that the level of voluntary disclosure is significantly associated with firm-specific incentives, such as the demand for information from investors and the need for legitimacy. It finds that the level of voluntary disclosure is significantly higher in the UK than in Italy and that firm-specific incentives to disclose voluntary information differ according to the institutional setting in which a firm operates. In the UK, firm-specific incentives mostly come from the demand for information, estimated with the level of ownership diffusion, and the need for legitimacy generated by poor market performance and shareholders' dissent. In Italy, firm-specific incentives seem to be represented by the need for legitimacy generated by media coverage. This study also provides evidence that, in both countries, the information disclosed in corporate documents does not allow readers to obtain a comprehensive picture of directors' remuneration. Bonuses are poorly disclosed even though they are a key element of directors' remuneration. This finding is clearly important for policymakers at European and national level.Keywords: agency theory, directors' remuneration, disclosure, legitimacy theory. 2 IntroductionDirectors' remuneration aims to align the interests of directors with those of shareholders, thereby reducing agency problems (Jensen & Meckling, 1l976). However, directors' remuneration, of itself, could give rise to agency problems (Bebchuk et al., 2002). This is one of the key areas where directors may have a conflict of interest and where due account should be taken of the interests of shareholders (EU Commission, 2004). Controversy surrounding directors' remuneration reflects the perception that payments have been excessive and that the lack of timely and adequate disclosure has resulted in increased information asymmetry and rent-extraction (Bebchuk et al., 2002, Jensen et al., 2004. The demand for public disclosure arises from information asymmetry and agency conflicts between directors and outside investors (Healy & Palepu, 2001). Disclosure on directors' remuneration would help to resolve such problems. It can reduce information asymmetry on complex remuneration arrangements that can be an important mechanism to transfer wealth from shareholders to directors (Bebchuk et al., 2002;Laksmana, 2008; Nelson et al., 2010). Moreover, directors' remuneration has been blamed for playing a central role in many international corporate scandals, as well as having been a key factor that contributed to the global financial crisis (e.g., Bebchuk & Fried, 2005). Consequently, regulators have been concerned that directors should be accountable to shareholders by disclosing their remuneration policies. In particular, the EU Commission (2004;) has issued two non-binding ...

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Section: H3d: the Extent Of Voluntary Disclosure Of Directors' Remunementioning

confidence: 99%

mentioning

confidence: 99%

Directors' remuneration: A comparison of Italian and UK non-financial listed firms' disclosure

Melis

Gaia

Carta

2015

The British Accounting Review

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“…While Mangen and Mangnan (2012) underline both the benefits and unintended consequences of Say on Pay schemes, Drymiotes and Sivaramakrishnan (2012) To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints…”

Section: Commentmentioning

confidence: 99%

Pay and display

2013

Strategic Direction

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If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/ authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.

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“…Given that the aim of SoP is to combat excessive compensation when boards are dominated by powerful CEOs and/or process information deficienthly (Mangen & Magnan, 2012), we have developed the following two hypotheses to examine the Canadian context where the adoption of SoP remains voluntary. According Cai and Walkling (2011) and Grundfest (1993), SoP is symbolic, and symbols can lead to negative publicity and embarrassment.…”

Section: Literature Reviewmentioning

confidence: 99%

“…In other words, the board of each of the TSX-listed firms made a conscious decision to consult shareholders about compensation policies. Economic players therefore question the relevance of a regulation that would compel all companies on the Canadian market to adopt SoP (Mangen & Magnan, 2012; Institute for governance of public and private organizations, 2010;Mercer, 2014). Some institutional investors, like the Ontario Teachers' Pension Plan, believe that the cost of an SoP regulation would exceed the anticipated benefits (lower agency costs).…”

Section: Introductionmentioning

confidence: 99%

Impact of Say on Pay on Executive Compensation of Firms Listed on the Toronto Stock Exchange

Berthelot¹,

Serret²,

Sylvain³

et al. 2015

IJBM

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Unlike in a number of other countries, the United Kingdom and the United States being two examples, SoP is not prescribed by regulation in Canada. To contribute to the debate on the relevance of a regulation adapted to the Canadian context, this article measures the impact of Say on Pay in firms listed on the Toronto Stock Exchange that voluntarily adopted this practice. Based on a sample of 45 firms, the study results show that the adoption of SoP does not improve the pay-performance relationship or lead to lower executive total compensation. These findings therefore raise questions about the effectiveness of Say on Pay as a governance tool.

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“Say on Pay”: A Wolf in Sheep's Clothing?

Cited by 42 publications

References 128 publications

Directors' remuneration: A comparison of Italian and UK non-financial listed firms' disclosure

Directors' remuneration: A comparison of Italian and UK non-financial listed firms' disclosure

Pay and display

Impact of Say on Pay on Executive Compensation of Firms Listed on the Toronto Stock Exchange

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