Does say on pay matter? : evidence from the German natural experiment

We analyze a hand-collected dataset of 1669 executive compensation packages at 34 firms included in the main German stock market index (DAX) for the years 2006- 2014 in order to investigate the impact of the 2009 say on pay legislation. First, we observe that the compensation packages of management board members of Germany's DAX30-firms are closely linked to key performance measures such as return-onassets and EBIT. Second, our analysis indicates that ownership concentration has no significant effect on compensation, which can be read as support of the view that managerial self-serving by usurping the payroll is largely absent even where companies exhibit dispersed share ownership. Third, and most important for our topic, our findings suggest that it pays a lot to take a closer look to the contractual set-up of the compensation schemes. When considering only the overall board members' compensation, the hypothesis of lower remuneration in case of low shareholder support for compensation packages in say on pay-votes can be rejected. Our findings do not support this view, which is not at all surprising given the rather rigid contractual framework for the compensation of management board members. However, we find that the supervisory board seems to be responsive to say on pay-votes when it comes to the design of newly entering candidates.