‘SAY ON PAY’ REGULATION AND CHIEF EXECUTIVE OFFICER PAY: EVIDENCE FROM AUSTRALIA

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Mahdi Faghani, Reza Monem, Chew Ng

DOI:10.22495/cocv12i3p3

Abstract

We investigate the consequences of Australia’s ‘say on pay’ regulation on the chief executive officer (CEO) compensation using recent data. We find that, for the ‘first-strike’ firms that avoided a ‘second strike’ (the treatment firms), a reduction in CEO total remuneration is positively associated with a lower level of shareholder dissent votes on the following remuneration report. We also find that, unlike control firms, the treatment firms increased the proportion of CEO’s performance-based pay in the year following the ‘first strike’ and such an increase is negatively related to a change in shareholders’ dissent level. Further, detailed descriptive analysis suggests that the ‘first-strike’ firms made relatively more frequent and larger pay reductions by reducing the level of pay in one or more components of the CEO pay.

Keywords: ‘Say on Pay’, CEO Pay; ‘Two-strikes’ Rule, Performance-based Pay, Shareholder Dissent

How to cite this paper: Faghani, M., Monem, R, & Ng, C. (2015). ‘Say on pay’ regulation and chief executive officer pay: Evidence from Australia. Corporate Ownership & Control, 12(3), 28-39. http://doi.org/10.22495/cocv12i3p3