Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Tutoring
  • Home
  • Law, Transactions, & Risk Management
  • Business Entities, Corporate Governance & Ownership

Say on Pay Rights - Explained

What is Say on Pay?

Written by Jason Gordon

Updated at September 25th, 2021

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

What is Say-on-pay?How Does Say on Pay Work?Academic Research on Say on Pay
Back To: BUSINESS ENTITIES, CORPORATE GOVERNANCE, & OWNERSHIP

What is Say-on-pay?

Say on pay describes a periodic process required by the law in which the shareholders of a firm can vote on the payment or remuneration of executives and general compensation policies. Say on pay explains the ability of shareholders to actively participate in a process that decides on compensation of executives. This Say on pay role performed by shareholders is backed up by corporate law and it is practiced periodically in most public companies. This can also be regarded as an advisory vote on payment and compensation by key stakeholders of a firm.

How Does Say on Pay Work?

Say on pay provisions were created by corporate law to curb excesses in payments and compensation of highly placed executives of a firm. In an actual sense, managers or executives of a firm are meant to be paid but these officials tend to overpay themselves and this needs to be curbed, hence, the introduction of Say on Pay. Say on pay sets up a board of trustees that has a fiduciary duty to protect the interest of the firm. It allows a firms stakeholders to decide on the appropriate compensation plan for its top executives. Despite the effectiveness of say on pay, there are diverse criticisms levied against its provisions. Say on pay emerged as a result of stakeholders revolt against the amount that company executives were being paid. Before the say to pay legislation was introduced, here are some firms that experienced stakeholders revolt against executives pay and compensation;

  1. In July 2001, the shareholders of Vodafone company voted against 13m in shares for CEO Sir Chris Gent.
  2. In April 2005, shareholders also voted against the Former chairman of Unilever, Niall Fitzgerald who got 1.2m after profits fell in 2005.
  3. 15% of Tesco shareholders also voted against an 11.5m bonus that was added to the salary of the CEO, Sir Terry Leahy in June 2007.

Aside from the above listed companies, there are several other firms where shareholders revolted against the overpay of executives.

Related Topics

  • Appraisal Rights
  • Dissenter's Rights
  • Say on Pay Rights

Academic Research on Say on Pay

  • Shareholders' say on pay: Does it create value?, Cai, J., & Walkling, R. A. (2011). Journal of Financial and Quantitative Analysis, 46(2), 299-339.
  • Say on pay votes and CEO compensation: Evidence from the UK, Ferri, F., & Maber, D. A. (2013). Review of Finance, 17(2), 527-563.
  • Shareholder votes and proxy advisors: Evidence from say on pay, Ertimur, Y., Ferri, F., & Oesch, D. (2013). Journal of Accounting Research, 51(5), 951-996.
  • Shareholder voting and directors' remuneration report legislation: Say on pay in the UK, Conyon, M., & Sadler, G. (2010). Corporate Governance: An International Review, 18(4), 296-312.
  • Say on pay: Cautionary notes on the UK experience and the case for shareholder opt-in, Gordon, J. N. (2009). Harv. J. on Legis., 46, 323.
  • Say on pay laws, executive compensation, pay slice, and firm valuation around the world, Correa, R., & Lel, U. (2016). Journal of Financial Economics, 122(3), 500-520.
  • Dodd-Frank's say on pay: Will it lead to a greater role for shareholders in corporate governance, Thomas, R. S., Palmiter, A. R., & Cotter, J. F. (2011). Cornell L. Rev., 97, 1213.
  • Boards' response to shareholders' dissatisfaction: The case of shareholders' say on pay in the UK, Alissa, W. (2015). European Accounting Review, 24(4), 727-752
  • .Remarks on say on pay: an unjustified incursion on director authority, Bainbridge, S. (2008). 
  • Power to the principals! An experimental look at shareholder say-on-pay voting, Krause, R., Whitler, K. A., & Semadeni, M. (2014). Academy of Management Journal, 57(1), 94-115.
  • Does sayonpay matter? Evidence from sayonpay proposals in the United States, Burns, N., & Minnick, K. (2013). Financial Review, 48(2), 233-258.
  • The impact of say-on-pay on executive compensation, Balsam, S., Boone, J., Liu, H., & Yin, J. (2016). Journal of Accounting and Public Policy, 35(2), 162-191.
say on pay rights say on pay

Was this article helpful?

Yes
No

Related Articles

  • Conglomerate - Explained
  • How are Partner's Compensated - Explained
  • Revlon Rule - Explained
  • NonProfit Business Entities - Explained



©2011-2021. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand