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Call for government inquiry to consider research evidence to maintain ‘say on pay’ legislation

Accounting and Finance Professor Konstantinos Stathopoulos has called on the government to consider empirical evidence and retain existing Say on Pay legislation as a means of managing executive pay.

Say on Pay is an important corporate governance mechanism which was first introduced in 2002 and mandates a shareholder vote on the executive pay arrangements proposed by the board of directors.

Dr Stathopoulos has submitted written evidence to the Business, Innovation and Skills Committee inquiry on Corporate Governance arguing that the existing legal framework is sufficient and effective as most long-term institutional investors vote overwhelmingly in favour of board proposals not because of a lack of interest from investors towards this mechanism but as a result of influencing boards behind the scenes.

The inquiry was initiated in the wake of commitments from Prime Minister Theresa May to overhaul corporate governance. As well as executive pay, the terms of reference cover director duties and the composition of boards.


Earlier this year Dr Stathopoulos, together with Georgios Voulgaris from Warwick Business School published research showing that shareholder investment horizons have a significant impact on Say-on-Pay voting patterns.

The study found that institutional investors holding UK-listed equity have on average a long-term investment horizon, which helps explain the lack of high levels of abstaining or dissenting votes typically highlighted in the financial press as evidence against the efficiency of Say on Pay.

Says Dr Stathopoulos: “The empirical evidence reported in the research suggests that the dominance of favourable voting by long-term investors is due to effective monitoring rather than collusion with firm management. Thus, the overwhelming positive Say on Pay voting recorded for the average UK firm is not because of investor indifference towards this mechanism or ineffective corporate governance, but comes as a result of investors’ influencing boards at the proposal drafting stages.”