Giving a Shareholders a Say on Pay: A Measure Leading to Better Governance

Abstract

The arguments pros and cons a non-binding vote by shareholders on executive compensation do not readily tip the balance in one direction or the other. The sense of unfairness and the frustration with some patent cases of excessive compensation have generated a good deal of sympathy for more direct and vigorous measures to curb extravagant compensation practices. Nevertheless, boards of directors fully responsible and accountable for the governance of publicly traded corporations do form the cornerstone of our system of corporate governance.