The adoption of voluntary Say-on-Pay

Sylvie Berthelot (1) , Michel Coulmont (1) , Vanessa Serret (2)

1 UdeS - Université de Sherbrooke
2 CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises

Say-on-Pay (SOP) gives shareholders the right to vote on executive compensation. Unlike in a number of other western countries, SOP is not prescribed by regulation in Canada, although more and more firms are now adopting this practice voluntarily. We take advantage of this legal context to first examine the characteristics of firms that have voluntarily adopted SOP. Secondly, we examine whether shareholders’ votes are linked to the extent and specifics of the compensation granted; and thirdly, we determine whether the votes cast affect executive compensation growth in the next year. The statistical analyses are based on a sample of 744 observations covering the years from 2013 to 2017. Results suggest that the firms that have voluntary adopted SOP differ significantly in several ways from those that have not. SOP vote results appear to be negatively related to the level and growth of total CEO compensation and its components involving immediate cash outflows. The vote does not seem to impact executive compensation and its components in the following year.

Mots clés: Say-on-Pay; CEO compensation; shareholder democracy; corporate governance; regulation.

Domaines: Economies et finances; Gestion et management

Sylvie Berthelot, Michel Coulmont, Vanessa Serret. The adoption of voluntary Say-on-Pay: The Canadian experience. Revue française de gouvernance d'entreprise, 2021, n°24, pp.9-47. ⟨hal-03550420⟩