Pay regulation – is more better?
Chu, J; Gupta, A; Livne, G
Date: 24 September 2020
Journal
Accounting and Business Research
Publisher
Taylor & Francis (Routledge)
Publisher DOI
Abstract
From October 2013, UK law and regulations (the Reform) require periodic binding shareholders’
approval of executive directors’ remuneration policy, as well as enhanced disclosure in
remuneration reports. These requirements supplement an ongoing requirement for an annual nonbinding vote on compensation outcomes that are detailed in ...
From October 2013, UK law and regulations (the Reform) require periodic binding shareholders’
approval of executive directors’ remuneration policy, as well as enhanced disclosure in
remuneration reports. These requirements supplement an ongoing requirement for an annual nonbinding vote on compensation outcomes that are detailed in the remuneration report. Using a large
sample of listed companies from 2010–2017 we investigate whether the Reform has affected pay
levels, pay-performance sensitivity, the pay gap between the CEO and other employees, the
amount of cash returned to shareholders, and dissent voting on the remuneration report. We find
little evidence that the Reform has affected these variables in our sample firms. Using marketbased tests we find that market participants anticipated an improvement in corporate governance
for some key dates before the Reform came into force. Taken together, the paper’s evidence
suggests the Reform has not met its stated objectives.
Finance and Accounting
Faculty of Environment, Science and Economy
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