Issue Date
February 2013
Abstract
This paper estimates the effect of increasing shareholder “voice” in corporations through a new governance rule that provides shareholders with a regular vote on pay: Say on Pay. We apply a regression discontinuity design to Say on Pay shareholder proposals to deal with prior expectations and the endogeneity of internal governance rules. Adopting Say on Pay leads to large increases in market value (5.4 percent), firm profitability, and long-term performance. In contrast, we find small effects on the level and structure of pay. This suggests that Say on Pay operates as a regular confidence vote, increasing efficiency, and market value.
Series
Policy Paper No. 2013-015
DOI
10.17848/pol2013-015
Sponsorship
Keywords
agency cost, corporate governance, shareholder meetings, regression discontinuity, event studies, say on pay, shareholder oversight, firm performance, executive pay, performance pay, Dodd-Frank Wall Street Reform and Consumer Protection Act
Subject Areas
LABOR MARKET ISSUES; Wages, health insurance and other benefits
Citation
Guadalupe, Maria, Vicente Cuñat, and Mireia Gine. 2013. "Say Pays! Shareholder Voice and Firm Performance." Policy Paper No. 2013-015. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research. https://doi.org/10.17848/pol2013-015