Proxy Voting and CEO Pay : Evidence from Rejection of the Inevitable Disclosure Doctrine

We examine the efficacy of proxy voting to limit inflated CEO pay. We find that the percentage of dissenting votes that go against director-sponsored compensation proposals increases following a staggered rejection of the Inevitable Disclosure Doctrine (RIDD), which increases CEOs’ job mobility. Consistent with a rent extraction view, this effect is stronger for firms with poor performance, overpaid CEOs, and weak corporate governance. We also show that the proxy advisor issues more dissent voting recommendations after RIDD. We find that institutional investors with smaller holdings in the firm dissent more against these proposals after RIDD. Finally, dissenting votes help limit growth in CEO pay after RIDD. Overall, our paper highlights the efficacy of shareholders and proxy advisors in limiting excess CEO pay