September 6, 2017
Say-on-Pay: Is Anybody Listening?
– Liz Dunshee
Last month, I blogged about research showing that say-on-pay might be curbing excessive CEO compensation. This “Harvard Law” blog takes a closer look at say-on-pay studies, since findings vary. Here’s a teaser:
– Say-on-pay votes have little effect on reducing CEO compensation levels
– Say-on-pay votes do affect pay-performance sensitivity; CEOs of firms with negative votes face a greater penalty for poor performance than other CEOs
– Increased disclosure and shareholder engagement are two key non-quantifiable benefits of say-on-pay
– Unintended consequences of say-on-pay include movement to “one size fits all” executive compensation programs and a disregard for the creation of economic value
The author concludes there’s no clear consensus on what problem say-on-pay was trying to solve or the desired outcome of the requirements. Nobody knows whether executive pay would’ve been higher without it or if there would’ve been some other limiting factor that came into play.
Sounds like we’ll just need to keep working with what we have…