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Does “Say on Pay†Work? Evidence from Forced CEO Turnover and Compensation Committee Members Turnover

Author

Listed:
  • Wikil Kwak

    (School of Accounting, University of Nebraska Omaha, Omaha, NE 68182, USA)

  • Xiaoyan Cheng

    (School of Accounting, University of Nebraska Omaha, Omaha, NE 68182, USA)

  • Xiao Song

    (School of Accounting, University of Nebraska Omaha, Omaha, NE 68182, USA)

  • Huishan Wan

    (Department of Accounting, University of Northern Iowa, Iowa 50614, USA)

Abstract

This study examines the effectiveness of shareholders’ “Say on Pay†(SOP) votes in prompting board responsiveness. Using shareholders’ SOP votes between 2011 and 2016, we find that firms with greater dissent votes are more likely to experience subsequent forced CEO turnover and compensation committee members (CCMs) turnover. We also find that the relationship between SOP dissent votes and subsequent forced CEO turnover and CCM turnover is strengthened in firms with a high level of dedicated institutional ownership, but not in firms with high transient institutional ownership. These findings reveal that dedicated institutional ownership is a channel through which the disciplinary mechanism of SOP votes becomes more visible. Overall, our study provides evidence that SOP votes serve as an effective corporate governance mechanism.

Suggested Citation

  • Wikil Kwak & Xiaoyan Cheng & Xiao Song & Huishan Wan, 2025. "Does “Say on Pay†Work? Evidence from Forced CEO Turnover and Compensation Committee Members Turnover," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 28(03), pages 1-50, September.
    • Handle: RePEc:wsi:rpbfmp:v:28:y:2025:i:03:n:s0219091525500183
    DOI: 10.1142/S0219091525500183
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    Keywords

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    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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