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The Influence of ‘Say on Pay’ on Excessive Executive Compensation in the UK and the US
Author(s) -
Zhe Wang,
Yan Wu
Publication year - 2021
Publication title -
journal of politics and law
Language(s) - English
Resource type - Journals
eISSN - 1913-9055
pISSN - 1913-9047
DOI - 10.5539/jpl.v14n4p71
Subject(s) - remuneration , executive compensation , shareholder , compensation (psychology) , accounting , corporate governance , business , economics , management , finance , psychology , social psychology
Along with the separation of ownership and control in modern companies, the agency problem between shareholders and managers has become a core issue in corporate law. In recent decades, there was a trend of increasing executive compensation in many countries, which led to shareholders’ dissatisfaction and social concerns about the income gap. Since directors did not effectively solve the problem of excessive executive remuneration, many countries introduced the advisory shareholder vote on the remuneration report (‘Say on Pay’). It is a new mechanism that allows shareholders to vote on executive remuneration. After it was first introduced in the UK, many other countries including the US adopted ‘Say on Pay’ to relieve the problem of excessive executive remuneration. However, there is an ongoing debate about whether ‘Say on Pay’ has a meaningful influence on excessive executive compensation. Some believe that shareholder voting results lead directors to create better executive remuneration plans. Others argue that ‘Say on Pay’ contributes little to solving this problem. It is therefore essential to analyse the effects of ‘Say on Pay’ on solving the excessive executive remuneration problem in the UK and the US. This essay will analyse several arguments related to the influence of ‘Say on Pay’ on excessive executive compensation in order to demonstrate the reasons why ‘Say on Pay’ contributes little to solving the excessive executive remuneration problem in the UK and the US.

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