2013•Scholarship @ Claremont (The Claremont Colleges)Open access

How do Shareholders Use Their Say-on-Pay Votes in the United States? Evidence from 2011 and 2012

Peter Kimmey

Abstract

This paper examines shareholder disapproval of CEO compensation as expressed through their advisory vote on executive compensation (say-on-pay) as required by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Using a sample of 884 votes by S&P 500 firms in 2011 and 2012, I find that higher CEO salary, a weak link between pay and performance, and higher dilution from stock option grants are associated with lower say-on-pay approval. In addition, I find evidence that shareholders are sophisticated in their examination of CEO compensation by voting against excess compensation over what is deserved due to performance and other determining factors.

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Key concepts: Executive compensation, Shareholder, Salary, Voting, Accounting, Compensation (psychology), Business, Stock options