“Ten Myths of “Say on Pay” (Stanford GSB Paper)

The Stanford Graduate School of Business has published an intriguing paper entitlted Ten Myths of Say on Pay –>

INTRODUCTION “Say on pay” is the practice of granting shareholders the right to vote on a company’s executive compensation program at the annual shareholder meeting. Say on pay is a relatively recent phenomenon, having been first required by the United Kingdom in 2003 and subsequently adopted in countries including the Netherlands, Australia, Sweden, and Norway. The U.S. adopted say on pay in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under Dodd-Frank, companies are required to hold an advisory(nonbinding) vote on compensation at least once every three years. At least once every six years, companies are required to ask shareholders to determine the frequency of future say-on-pay votes (with the options being every one, two, or three years, but no less frequently). Advocates of say on pay contend that the practice of submitting executive compensation for shareholder approval increases the accountability of corporate directors to shareholders and leads to more efficient contracting, with rewards more closely aligned with corporate objectives and performance.

Toread the original document, click here.

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