The Real Value of Say-on-Pay

In light of the financial crisis, shareholder activism is growing around the globe, leading to Say-on-Pay policies, which give shareholders the opportunity to voice their opinions on executive pay, and put pressure on boards to justify and explain pay packages more clearly to shareholders, if not redesign them completely. In several high-profile cases, large companies have failed to obtain approval of pay packages for their CEOs due to such activism. Given the trend toward implementing Say-on-Pay in the United States and several European countries, the author collaborated on research to determine the real effect of such policies on companies and their performance. The research shows that while Say-on-Pay may not curb excessive remuneration, it does provide a host of other measurable, positive benefits for companies and their shareholders, both in the immediate and longer terms. Apart from these benefits, she argues that Say-on-Pay can be an effective way for strengthening corporate governance and accountability within the firm, outweighing the time and costs they require.