Market Feedback Effect on CEO Pay: Evidence from Peers’ Say-on-Pay Voting Failures
Prof. Feng TANG
Assistant Professor in Accounting
FBA, UM
Date: 9 September 2024 (Monday)
Time: 11:30 a.m. – 12:30 p.m.
Venue: FBA Lobby
Abstract
Our paper shows that when a compensation peer firm experiences a significant failure in its say on pay (SOP) voting, the focal firm’s stock price is adversely affected, and as a result, the CEO’s pay is reduced in the subsequent period. This pay-reduction effect is amplified when the board of directors is more powerful relative to the CEO, when proxy advisors have expressed concerns about CEO pay, and when the quality of the hired compensation consultant is lower. Moreover, directors who react to the price drop and cut the CEO’s pay receive higher voting support from investors in future director elections. Our findings demonstrate the existence of a market feedback effect for directors of the focal firm triggered by their peers’ SOP voting failure. These findings have implications for regulators and offer insights into the efficacy of SOP voting rules.
All are welcome!
