Research Seminar w. Martin Conyon (Bentley)
Abstract: The Dodd Frank Act (2010) empowered shareholders (i.e. gave them ‘voice’) by providing mandatory but non-binding voting on executive compensation. This paper investigates the relation between shareholder say-on-pay voting and CEO compensation. It contains several findings. First, the study finds fewer than 3% of firms failed to pass their say-on-pay proposals, using US data from 2010 to 2012. Second, shareholder opposition to the say-on-pay proposal is higher in firms where CEO compensation is high or ‘excessive’, consistent with agency theory. Third, shareholder dissent on CEO pay is higher in firms with poor performance, measured by stock-market or accounting returns. Fourth, firms engaging one of the major compensation consultants are less likely to receive shareholder opposition to the say-on-pay proposal. There are fewer votes against the pay proposal in firms with better quality boardroom governance (e.g. the presence of a non-CEO lead director). Lastly, the study shows the causal effect of shareholder ‘voice’ on CEO pay. Shareholder opposition to the firm’s say-on-pay proposal is associated with lower growth rates in CEO pay. Overall, the study shows the determinants of shareholder voice on say-on-pay and its impact on CEO pay.
Martin Conyon is a Professor at Bentley University and a Senior Fellow at the Wharton School, University of Pennsylvania. He holds a Ph.D. in Economics from the University of Warwick. Martin studies organizations and corporate governance. He has written extensively on boards of directors, executive compensation, leadership and top management teams, stakeholder interests, organizational restructuring, society and ethics. Martin's current research investigates how corporate governance shapes organizational outcomes and performance. His research has appeared in leading academic journals including the Academy of Management Journal, the Strategic Management Journal, Organization Science, the Economic Journal and the Review of Financial Studies. He serves on the editorial board of major journals including the Strategic Management Journal and Long Range Planning.