CEO compensation is a controversial topic and after the financial crisis, the Dodd-Frank financial overhaul introduced a provision that allows company shareholders to vote on executive compensation plans.
This provision went into effect and, surprisingly, in 2011 almost 99% of companies’ executive compensation packages were approved by the shareholder vote. And almost three-quarters of companies had more than 90% shareholder support, according to an article in The Wall Street Journal.
Though the shareholder votes are not binding for a company, the resulting PR of a compensation rejection was enough to force companies to take shareholder concerns seriously.
A very low 39 of 2532 had their executive compensation plans rejected by shareholders.
Those who had hoped the measure would rein in executive compensation were less than pleased with the results. A New York Times blog says, “The latest ‘say on pay’ endeavor has turned into a costly exercise that validates almost every company’s pay practices… Justice Louis D. Brandeis famously wrote, ‘Sunlight is the best disinfectant,’ but for compensation it has had a perverse effect.”
Read: A ‘Yes’ in Say on Pay