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Does shareholder approval requirement of equity compensation plans matter?

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  • Ng, Lilian
  • Sibilkov, Valeriy
  • Wang, Qinghai
  • Zaiats, Nataliya

Abstract

This paper studies the impact of the 2003 SEC Regulation requiring shareholder approval of all equity-based executive compensation plans on executive compensation policies and practices at S&P 500 firms. Following the 2003 Regulation, firms with shareholder approved equity plans in place or those with strong performance, while not those with non-approved plans or weak performance, increase their equity compensation proposal submission activity. The quality of equity compensation proposals improves in the after-regulation period, and shareholders exhibit greater scrutiny and monitoring of executive compensation through increased voting rights. We find a decline in the equity pay component while an increase in the cash component of total executive compensation after the 2003 Regulation and also provide evidence that the 2003 Regulation contributes to this change in compensation structure.

Suggested Citation

  • Ng, Lilian & Sibilkov, Valeriy & Wang, Qinghai & Zaiats, Nataliya, 2011. "Does shareholder approval requirement of equity compensation plans matter?," Journal of Corporate Finance, Elsevier, vol. 17(5), pages 1510-1530.
  • Handle: RePEc:eee:corfin:v:17:y:2011:i:5:p:1510-1530 DOI: 10.1016/j.jcorpfin.2011.08.005
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    References listed on IDEAS

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    Cited by:

    1. Tang, Chun-Hua, 2016. "Impacts of future compensation on the incentive effects of existing executive stock options," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 273-285.
    2. repec:eee:jfinec:v:125:y:2017:i:2:p:389-415 is not listed on IDEAS
    3. Li, Ting & Zaiats, Nataliya, 2017. "Information environment and earnings management of dual class firms around the world," Journal of Banking & Finance, Elsevier, vol. 74(C), pages 1-23.

    More about this item

    Keywords

    Executive compensation; Equity compensation; SEC regulation; Shareholder voting rights;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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