BOARDS’ RESPONSE TO SHAREHOLDERS’ DISSATISFACTION: THE CASE OF SHAREHOLDERS’ SAY ON PAY IN THE U. K.
Open Access
Author:
Al-issa, Walid Mohammed
Graduate Program:
Business Administration
Degree:
Doctor of Philosophy
Document Type:
Dissertation
Date of Defense:
June 15, 2009
Committee Members:
Karl A Muller Iii, Dissertation Advisor/Co-Advisor Karl A Muller Iii, Committee Chair/Co-Chair Paul David Fischer, Committee Member Amy Sun, Committee Member
In the United Kingdom, a recently adopted regulation provides shareholders the opportunity to cast non-binding (advisory) votes on firms’ compensation reports during annual meetings (i.e., ‘Say-on-Pay’). This study examines how the regulation affected the behavior of shareholders and boards. I find evidence that shareholders use the vote to convey their dissatisfaction with excessive executive compensation practices. In addition, I find evidence that boards respond to shareholders’ dissatisfaction by: (1) reducing the excessiveness of CEO compensation for firms whose CEOs have above average excess compensation; or (2) forcing the CEO out of office. These findings provide evidence of ‘Say-on-Pay’ regulation playing a role in firms’ corporate governance.
