Business, Management and Accounting
3 years ago

Say goodbye to say-on-pay: Shareholders better off firing board members

International Journal of Corporate Governance
Does say-on-pay benefit shareholders
Shivendu Shivendu, Joseph Vithayathil

Paper Summary

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The article explores whether say-on-pay benefits shareholders. It compares two governance structures: one where shareholders delegate CEO compensation decisions to the board, and another where shareholders determine compensation. The study finds that say-on-pay does not improve shareholder welfare. CEO incentives can decrease shareholder welfare due to luck playing a significant role. Shareholders are better off having the right to fire board members to dismantle board entrenchment, which makes it costly to replace boards.