Say on Pay
The article by Mangen & Magnan (2012), analyzes the ‘say on pay’ regime of determining the CEO’s pay in an organization. The authors attempt to demystify the concept of say on pay by comparing it with the compensation systems in which the directors set the pay for executives. To derive these comparisons, the authors analyze the merits and demerits of executive compensation set by the directors and further shed light on the challenges of this system towards satisfying stakeholders. The CEO’s compensation problem as set by directors is discussed in the article under two dimensions; CEO’S power and Director’s information problem (Mangen & Magnan, 2012).
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On the issue regarding enriching diversity in the board of directors, the article does not fully scrutinize the problem especially with regards to the heterogeneous nature of the majority share holder. The majority shareholder may be an individual who is equally homogeneous both on dimensions of demographics as well as professionalism. Therefore, including him/her does not change bearing of decision making with regards setting CEO’s pay.
Cai, J., & Walkling, R. A. (2011). Shareholders’ say on pay: Does it create value?. Journal of Financial and Quantitative Analysis, 46(02), 299-339. Retrieved from www.shareholderforum.com/SOP/Library/20090328_Cai-Walkling.pdf
Mangen, C., & Magnan, M. (2012). “Say on Pay”: A Wolf in Sheep’s Clothing.