‘Is Say on Pay working? Evidence from the UK’

Copyright 2019 The Authors. Directors’ remuneration has remained a hotly debated issue and many countries have enacted rules and regulations to address the concerns on directors’ remuneration. This paper examines the effectiveness of one of the important regulations, which is the binding “say on pay (SOP)” which became effective in 2013 in the UK. We examined SOP around this binding vote regime from 2009 to 2017 and found that overall shareholders’ dissent on directors’ remuneration is relatively low in the UK. This study shows that the directors of the firms with high dissent votes responded to the shareholders dissent by changing the remuneration practices in the years following the SOP vote. We also found that pay-performance sensitivity increased since the introduction of binding SOP vote. Overall, the first binding SOP vote has appeared successful in achieving the intended objective of ‘linking the pay and performance’ for most of the FTSE 350 firms. JEL Classification: G34, G38, J33, J38, M12The British Academy (grant number: SG163484)