Sheehan, Kym --- "Say on Pay and the Outrage Constraint" [2012] ELECD 611; in Thomas, S. Randall; Hill, G. Jennifer (eds), "Research Handbook on Executive Pay" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on Executive Pay

Editor(s): Thomas, S. Randall; Hill, G. Jennifer

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849803960

Section: Chapter 13

Section Title: Say on Pay and the Outrage Constraint

Author(s): Sheehan, Kym

Number of pages: 29

Extract:

13 Say on pay and the outrage constraint
Kym Sheehan


Say on pay is an important regulatory innovation in the area traditionally dominated by
disclosure-based regimes as a targeted transparency policy (Fung et al 2007). That said,
say on pay's success as a regulatory technique depends upon a number of factors, and how
it fits within the overall regulatory framework for executive remuneration in any particu-
lar jurisdiction can make a major difference to its operation. Improving board of director
accountability for executive remuneration decisions ­ the reason cited to justify regula-
tory intervention by government into board decision-making on remuneration (HM
Treasury 2009a; Productivity Commission 2009) ­ is not an end in and of itself: improved
remuneration practices are. Understanding how the vote fits within a regulatory frame-
work highlights how the `say' relates to the practice of `pay', in the process identifying
those levers which can be pulled by shareholders and those that are left for governments
in an attempt to achieve this end game of improved remuneration practices.
This chapter examines `say on pay' in the first three years after its introduction into law
in the UK and in Australia. Section 1 presents the theoretical framework for the study.
It begins in section 1.1 by examining the framework for executive remuneration in terms
of the economic theories that justify executive remuneration and its regulation. Section
1.2 maps the `regulatory space' (Hancher and Moran 1989) within which four activities
(practice, disclosure, engagement and voting) occur ...