The Dodd-Frank Act of 2010 mandated a number of regulatory reforms including a requirement that large U.S. public issuers provide their shareholders with the opportunity to cast a non-binding vote on executive compensation. The “say on pay” vote was designed to rein in excessive levels of executive compensation and to encourage boards to adopt compensation structures that tie executive pay more closely to performance. Although the literature is mixed, many studies question whether the statute has had the desired effect. Shareholders at most issuers overwhelmingly approve the compensation packages, and pay levels continue to be high.
Although a lack of shareholder support for executive compensation is relatively rare, say on pay votes at a number of issuers have reflected low levels of shareholder support. A critical question is what factors drive a low say on pay vote. In other words, is say on pay only about pay?
Authors
Jill Fisch
Darius Palia
