The Efficacy of Shareholder Voting: Evidence from Equity Compensation Plans


  • Accepted by Douglas Skinner. This paper has benefited from comments from Richard Frankel, Wayne Guay, Sudarshan Jayaraman, an anonymous reviewer, and workshop participants at University of Arizona, Cornell University, Dartmouth College, George Washington University, Harvard Business School, Harvard Law School, Northwestern University, Rice University, Seoul National University, the University of California at Davis, University of California at San Diego, University of Pennsylvania (Wharton), Washington University, and Yale University. We thank Balfe Morrison for excellent research assistance. We are also grateful for the support from the Stanford Graduate School of Business Center for Leadership Development and Research.


This study examines the effects of shareholder support for equity compensation plans on subsequent CEO compensation. Using cross-sectional regression, instrumental variable, and regression discontinuity research designs, we find little evidence that either lower shareholder voting support for, or outright rejection of, proposed equity compensation plans leads to decreases in the level or composition of future CEO incentive compensation. We also find that, in cases where the equity compensation plan is rejected by shareholders, firms are more likely to propose, and shareholders are more likely to approve, a plan the following year. Our results suggest that shareholder votes for equity pay plans have little substantive impact on firms’ incentive compensation policies. Thus, recent regulatory efforts aimed at strengthening shareholder voting rights, particularly in the context of executive compensation, may have limited effect on firms’ compensation policies.