Does institutional holders’ approval really matter? An examination of Israel’s binding vote on CEO compensation, from directors’ point of view

This study examines the implications of mandatory shareholder approval for chief executive officer (CEO) compensation in Israel, following the “say-on-pay” (SOP) framework. Through the utilization of a binding voting framework, shareholders evaluate the effectiveness of CEO compensation structures. A survey involving 106 Israeli directors occupying diverse board positions, including external, independent, regular, and chair positions, reveals that external directors demonstrate a greater appreciation for institutional votes. This highlights their acknowledgment of institutional perspectives and underscores the critical significance of fostering effective communication between boards and institutional stakeholders to strengthen corporate governance frameworks. The study emphasizes the pivotal role of dialogue in enhancing governance structures through a nuanced examination of challenges in executive compensation governance