The value of say on pay

We measure the impact of “say on pay” (SoP) – mandatory shareholder votes on top-management compensation – on the market value of voting rights. By exploiting the staggered introduction of SoP across 14 economies, we show that SoP does not automatically increase the value of shareholder voting rights. While stricter, binding SoP reforms increase voting values, looser advisory SoP laws decrease them. Firms that do not pay their CEOs excessively experience the largest decreases in voting values. Voting values also reflect a country’s level of investor protection, past dissent in SoP ballots, and dynamically adjust to changes in managerial compensation.