The Relationship Between Uk Shareholder Voting And Executive Pay

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Executive compensation keeps a highly controversial for recent years, with more credit crisis appears in companies, the action of shareholders’ vote on directors payment get more acception. The new reform act 2013 in the UK gives firm’ owners more power and influence to shape managers’ pay. In fact, this act is not only popular in the uk, also sprung up in other European countries, Australia and USA. In this essay, I will focus on discussing the relation between UK shareholder voting and executive pay. As for shareholders have a binding vote on executive compensation, I think the negative effects overweigh the positive ones. In the following paragraphs, I am gong to describe the benefits and harms.

At the first, I will give a defination
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The opinion is exactly confirmed by Ferri and Maber ’ s research (2012). Ferri and Maber based on a large-sample evidence of UK firms over the period 2002 to 2005 on the effect of SOP, they point that the increase in sensitivity of CEO pay to negative operating performance and no influence to stock performance. Otherwise, this new rule is benefit to reduce the unreasonable pay for CEO and improve the practice. In say-on-pay, if greater proportions of shareholders against owner-managers’ proposals, the result will create more value because managers have to make changes in corporate governance to adjust shareholders’ request. Meanwhile, the performance will be better under this pressure. This thought is similar with Cai and Walking (2011), firms would benefit the most when experience obvious positive abnormal interest and the market reacts positively with the most highly paid CEOs.

Besides, the second advantage is enhance the transparency, accountability and governance.This new regulation require boards publish directors’ compensation reports add to annual reporting, and disclose individual managers’ unreasonable payment.Under the fraud and financial scandals increase frequence and severe cases, the shareholders ask to improve the transparency of compensation and thereby make more perfect rule of corporate governance. M. B.
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