Research Handbook on Shareholder Power
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Research Handbook on Shareholder Power

Edited by Jennifer G. Hill and Randall S. Thomas

Much of the history of corporate law has concerned itself not with shareholder power, but rather with its absence. Yet, as this Handbook shows, there have been major shifts in capital market structure that require a reassessment of the role and power of shareholders. This book provides a contemporary analysis of shareholder power and considers the regulatory consequences of changing ownership patterns around the world. Leading international scholars in corporate law, governance and financial economics address these central issues from a range of different perspectives including historical, contemporary, legal, economic, political and comparative.
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Chapter 15: Say on pay

Fabrizio Ferri


On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (hereafter Dodd-Frank Act). One provision of the Act mandates that, beginning with annual meetings on or after January 21, 2011, US publicly traded firms allow shareholders a non-binding vote on executive pay, known as ‘say on pay’ (hereafter SOP). The purpose of this chapter is to present key insights from the academic research on the economic consequences of SOP. The chapter is organized around five parts. Section I provides a brief history of SOP, highlighting its role in the broader context of a gradual shift toward greater shareholder empowerment. The rich set of legislative events accompanying the adoption of SOP in many countries has provided fertile ground for empirical studies. Sections II and III review the evidence in such studies, focusing on the effect of SOP on executive pay and firm value respectively, followed by some concluding remarks in section IV. A caveat: the academic research on SOP is growing rapidly, as more data become available over time and across countries. As a result, many studies cited here are in the form of working papers and their findings should be viewed as preliminary. Also, I may have missed some of the most recent studies. Finally, I apologize if I do not discuss in equal depth all the studies and tend to focus instead on the work I am more familiar with, including my own.

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