Agency versus Hold-up: Benefits and Costs of Shareholder Rights

Agency versus Hold-up: Benefits and Costs of Shareholder Rights

Alexander Wagner, Christoph Wenk

Series number :

Serial Number: 
500/2017

Date posted :

May 14 2018

Last revised :

April 04 2017
SSRN Suggested citation Download this paper Open PDF Share

Keywords

  • Say-on-Pay • 
  • event study • 
  • Corporate governance • 
  • executive compensation

A set of policy experiments regarding binding say-on-pay in Switzerland sheds light on the hitherto mostly theoretical argument that shareholders may prefer to have limits on their own power.

The empirical evidence suggests a trade-off: Binding say-on-pay provides shareholders with an enhanced ability to ensure alignment; but when shareholders can (partially) set pay ex post, this may distort ex ante managerial incentives for extra-contractual, firm-specific investments. These findings inform the design of policy. The direct-democratic process by which say-on-pay was introduced in Switzerland also highlights the conflicts between society and shareholders when it comes to executive compensation.

Authors

Dr.
Real name:
Christoph Wenk
University of Zurich