Say on Pay Rights – Definition

Cite this article as:"Say on Pay Rights – Definition," in The Business Professor, updated April 23, 2019, last accessed October 20, 2020,


Say-on-pay Definition

Say on pay describes a periodic process required by the law in which the shareholders of a firm can vote on the payment or remuneration of executives and general compensation policies. Say on pay explains the ability of shareholders to actively participate in a process that decides on compensation of executives.

This Say on pay role performed by shareholders is backed up by corporate law and it is practiced periodically in most public companies. This can also be regarded as an advisory vote on payment and compensation by key stakeholders of a firm.

A Little More on What is a Say on Pay Provision

Say on pay provisions were created by corporate law to curb excesses in payments and compensation of highly placed executives of a firm. In an actual sense, managers or executives of a firm are meant to be paid but these officials tend to overpay themselves and this needs to be curbed, hence, the introduction of Say on Pay.

Say on pay sets up a board of trustees that has a fiduciary duty to protect the interest of the firm. It allows a firm’s stakeholders to decide on the appropriate compensation plan for its top executives. Despite the effectiveness of say on pay, there are diverse criticisms levied against its provisions.

Say on pay emerged as a result of stakeholders’ revolt against the amount that company executives were being paid. Before the say to pay legislation was introduced, here are some firms that experienced stakeholders’ revolt against executives’ pay and compensation;

  1. In July 2001, the shareholders of Vodafone company voted against £13m in shares for CEO Sir Chris Gent.
  2. In April 2005, shareholders also voted against the Former chairman of Unilever,  Niall Fitzgerald who got £1.2m after profits fell in 2005.
  3. 15% of Tesco shareholders also voted against an £11.5m bonus that was added to the salary of the CEO, Sir Terry Leahy in June 2007.

Aside from the above listed companies, there are several other firms where shareholders revolted against the overpay of executives.

References for Say on Pay Provisions

Academic Research on Say-on-Pay Provisions

•    Shareholders’ say on pay: Does it create value?, Cai, J., & Walkling, R. A. (2011). Journal of Financial and Quantitative Analysis, 46(2), 299-339.

•    Say on pay votes and CEO compensation: Evidence from the UK, Ferri, F., & Maber, D. A. (2013). Review of Finance, 17(2), 527-563.

•    Shareholder votes and proxy advisors: Evidence from say on pay, Ertimur, Y., Ferri, F., & Oesch, D. (2013). Journal of Accounting Research, 51(5), 951-996.

•    Shareholder voting and directors’ remuneration report legislation: Say on pay in the UK, Conyon, M., & Sadler, G. (2010). Corporate Governance: An International Review, 18(4), 296-312.

•    Say on pay: Cautionary notes on the UK experience and the case for shareholder opt-in, Gordon, J. N. (2009). Harv. J. on Legis., 46, 323.

•    Say on pay laws, executive compensation, pay slice, and firm valuation around the world, Correa, R., & Lel, U. (2016). Journal of Financial Economics, 122(3), 500-520.

•    Dodd-Frank’s say on pay: Will it lead to a greater role for shareholders in corporate governance, Thomas, R. S., Palmiter, A. R., & Cotter, J. F. (2011). Cornell L. Rev., 97, 1213.

•    Boards’ response to shareholders’ dissatisfaction: The case of shareholders’ say on pay in the UK, Alissa, W. (2015). European Accounting Review, 24(4), 727-752.

•    Remarks on say on pay: an unjustified incursion on director authority, Bainbridge, S. (2008).

•    Power to the principals! An experimental look at shareholder sayonpay voting, Krause, R., Whitler, K. A., & Semadeni, M. (2014). Academy of Management Journal, 57(1), 94-115.

•    Does sayonpay matter? Evidence from sayonpay proposals in the United States, Burns, N., & Minnick, K. (2013). Financial Review, 48(2), 233-258.

•    The impact of sayonpay on executive compensation, Balsam, S., Boone, J., Liu, H., & Yin, J. (2016). Journal of Accounting and Public Policy, 35(2), 162-191.


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