WHAT DOES THE MARKET SAY ABOUT SAY-ON-PAY? A LOOK AT THE CANADIAN BANK EXPERIENCE

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Abstract

This paper explores the share price reaction to a recent news announcement that Canadian banks were adopting say-on-pay, a policy that gives shareholders an annual non-binding vote on executive compensation. Using event study methodology, the effect of adopting this new policy is explored and found to be associated with a significant increase in share price. This result suggests that giving shareholders a voice on executive compensation is expected to generate economic benefits, which adds to the paucity of knowledge currently available to shareholders and legislators as they consider the consequences of say-on-pay.

Keywords: Corporate Governance, Executive Compensation, Event Study, Banks, Shareholder Activism

How to cite this paper: Trottier, K. (2012). What does the market say about say-on-pay? A look at the Canadian bank experience. Journal of Governance and Regulation, 1(3-2), 142-155. https://doi.org/10.22495/jgr_v1_i3_c2_p1