say on pay
A shareholder vote on executive compensation packages required by the Dodd-Frank Act, though non-binding, indicating shareholder sentiment on pay practices.
Example
“Only 32% of shareholders supported the CEO's $50 million pay package in the say on pay vote — an embarrassing rebuke.”
Memory Tip
SAY ON PAY = shareholders VOTE on executive compensation. Non-binding but publicly embarrassing when opposed.
Why It Matters
Say on pay votes affect you as a shareholder or investor because they influence how companies manage executive compensation, which can impact company performance and stock value. Understanding shareholder voting power helps you recognize that individual investors have a voice in corporate governance decisions, even if your impact is small.
Common Misconception
Many people believe say on pay votes are binding and can actually remove executives or force immediate pay cuts. In reality, these votes are non-binding expressions of shareholder opinion, meaning the board can acknowledge the vote but still choose to ignore shareholder concerns about compensation levels.
In Practice
At a major tech company, shareholders voted against the CEO compensation package worth 50 million dollars in 2023 with 55 percent voting no. While the board could not be forced to reduce the pay, they responded by restructuring the bonus components and adding performance metrics, demonstrating how say on pay can create real pressure for change even without binding authority.
Etymology
SAY (vote, voice) ON (regarding) PAY (executive compensation). Shareholders having a SAY on executive PAY.
Common Misspellings
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