The Impact of Say-on-Pay on Executive Compensation

Abstract

We investigate the impact of say-on-pay on 2010 executive compensation, finding affected firms reduced compensation and made it more performance-based, with that decrease being greater for firms that previously overpaid their CEOs. We also find the percentage of votes cast against executive pay is lower when the firm reduced executive compensation in advance of the initial say-on-pay vote, but higher when the firm pays higher total compensation, has a large increase in compensation, has a larger amount of compensation that cannot be explained by economic factors, or has a higher amount of “other compensation,” a category which includes perquisites.