Answering the Say for No Pay
Say on pay is considered an important tool to mitigate inappropriate remuneration practices. Over the years, many countries provided shareholders with this say on pay-tool, although often the vote is exclusively of an advisory nature. We analyse the regulatory framework of say on pay in two of these countries, the UK and Belgium. We provide evidence on the evolution of the dissenting votes of the remuneration report and identify the companies that experienced a disapproved remuneration report. We assess the effect of this dissenting vote by analysing the subsequent remuneration report and shareholders' vote as well as the evolution of the stock price. Although there are only limited guidelines how to address the dissenting vote and how to compile an adequate response, we found that many companies adjusted their remuneration practices, in particular the disclosing of pay-related information and amending bonus schemes. Remuneration levels are generally not adjusted. However, not all companies responded to the discontentment of the shareholders. The shareholders often positively react on the presented amendments in the subsequent vote of the remuneration report, but shareholder remain critical. Some subsequent shareholder approvals are hard to interpret. The research shows that say on pay positively affects communication between shareholders and companies but more is to be done on guiding the information exchange. We provide in a number of suggestions thereto.