Executive compensation: investor preferences during say-on-pay votes and the role of proxy voting advisers

Gomtsian, Suren ORCID: 0000-0002-7531-6187 (2023) Executive compensation: investor preferences during say-on-pay votes and the role of proxy voting advisers. Legal Studies. ISSN 0261-3875

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Abstract

Shareholder say-on-pay voting allows institutional investors to influence the incentives of managers and, consequently, corporate behaviour. Surprisingly, the preferences of investors on executive compensation have been largely overlooked in the ongoing debates on the role of say-on-pay in corporate governance and the impact of shareholder stewardship on sustainable corporate behaviour. The analysis of investor disclosed explanations of say-on-pay votes in the FTSE 100 companies during 2013–2021 shows that institutional investors rely repeatedly on several dominant themes aimed at improving the incentives of corporate managers and controlling managerial rent extraction. But shareholder interests remain the core focus of say-on-pay votes, with only few investors demanding that companies reward executive directors for protecting the interests of a broader range of affected stakeholders. Additionally, most investors can be grouped into several clusters formed around the voting recommendations of proxy advisers. A group of UK-based institutional investors stands out by taking a more individualistic and diverse approach to the stewardship of executive compensation. These findings highlight the role of local investors in the oversight of executive pay, the growing influence of proxy advisers along with the increasing share of foreign institutional investors, and the influence of best practice governance codes in driving investor stewardship preferences.

Item Type:	Article
Official URL:	https://www.cambridge.org/core/journals/legal-stud...
Additional Information:	© 2023 The Author(s)
Divisions:	Law
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HG Finance
JEL classification:	G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General M - Business Administration and Business Economics; Marketing; Accounting > M1 - Business Administration > M12 - Personnel Management
Date Deposited:	15 Dec 2023 12:45
Last Modified:	25 Apr 2024 16:25
URI:	http://eprints.lse.ac.uk/id/eprint/121068

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