The Impact of Investor Horizon on Say‐on‐Pay Voting

Abstract

Shareholder investment horizons have a significant impact on say‐on‐pay voting patterns. Short‐term investors are more likely to avoid expressing opinion on executive pay proposals by casting an abstaining vote. They vote against board proposals on pay only in cases where the CEO already receives excessive pay levels. In contrast, long‐term investors typically cast favourable votes. According to our findings, this is due to effective monitoring rather than collusion with the management. Overall, investor heterogeneity in terms of investment horizons helps explain say‐on‐pay voting, in particular the low levels of say‐on‐pay dissent, which have recently raised questions over the efficiency of this corporate governance mechanism.

It's OK to pay well, if you write well: The effects of remuneration disclosure readability

“…On the other hand, we expect that scepticism of pay arrangements is likely to be heightened when CEO pay is highly excessive. For example, Stathopoulos and Voulgaris (2016) demonstrate that less‐engaged shareholders refrain from casting a negative vote unless CEO pay is clearly excessive. We therefore conjecture that while shareholders’ default position may be to endorse pay arrangements when CEO pay is at normal levels, the default is more likely to be to challenge pay arrangements when CEO pay prima facie appears highly excessive (e.g., is well above benchmarks).…”

“…In the context of the SOP, retail investors, in particular, may consider that their vote is unlikely to be pivotal, and thus view only slight potential benefit from a thorough review of compensation arrangements. Accordingly, small shareholders appear disinclined to engage meaningfully with the SOP unless pay arrangements are clearly inappropriate, and tend not to vote “against” in the SOP unless executive pay is highly excessive (Stathopoulos & Voulgaris, 2016). It is reasonable, therefore, to expect that more complex CD&A may “put off” shareholders from challenging executive pay arrangements, unless they prima facie have a strong reason to believe that pay arrangements are problematic.…”

Pre‐Going Private Ownership Around the World

“…Owners are not the same. The time horizon of owners and investors affects investment decisions (Thanassoulis and Somekh, ) and voting practices (Stathopoulos and Voulgaris, ). Connelly et al .…”

Changing board behaviour: The role of the ‘Two Strikes’ rule in improving the efficacy of Australian Say‐on‐Pay

“…Our set of propensity score analyses are presented in Table and measure whether first and second ‘strikes’ in the previous financial year resulted in a change in total CEO pay on treated firms . We follow a similar approach to that of Stathopoulos and Voulgaris (), in that we employ several algorithms including kernel, radius and nearest neighbour (one‐to‐one and one‐to‐many) to match treatment and control groups. In our analysis, propensity scores are estimated before the treatment effect, and therefore all standard errors of the treatment effect estimate are bootstrapped…”