Abstract
This study explores the magnitude of shareholders' say on pay votes and its impact on future CEO compensation. This study draws its sample from US Russell 3000 companies, consisting largest US companies, from 2011 to 2019. By creating a dummy variable, we further divided our sample into Russell 3000 and S&P 500 for peer comparison. The study employs descriptive statistics, correlation analysis, and pooled OLS regression and finds that future CEO compensation is significantly negatively associated with pay gap opposition. The coefficient and t-stat were higher for S&P 500 than for the Russell group. The study also finds that the CEO-to-Employee pay ratio positively correlates with shareholder dissent votes. The coefficient and t-stat were higher for the Russell group than for the S&P 500. Each additional point of CTE increases the shareholder dissent votes increases by 1.4% for the Russell 3,000 companies. The study has important implications for corporate directors, investors, and policymakers. The study contributes to corporate governance literature, particularly on executive compensation. Our findings supported the view of social comparison theory and contented that shareholders view CEO compensation as a biased evaluation of his contribution to the firm. We have developed a unique measure of the CEO-to-Employee pay ratio, which is based on SEC methodology. Our findings provide empirical evidence to investors and policymakers in the United States and other jurisdictions.