Beware: Binding Say on Pay, May Pay the CEO more.
Four recent, independent articles paint an interesting picture on the topic of binding Say on Pay votes.
1. The UK’s potential new prime minister, post Brexit, could move to a binding Say on Pay vote to curb CEO pay (read more here).
2. A recent article by Fortune, suggests the US should move to more legislation like a binding Say on Pay Vote, because of escalating CEO pay over a long period.
3. However, contrast this with the recent article in Switzerland who already passed binding say on pay votes and saw CEO pay rise 11% last year vs. the New York times recent article which accurately reported CEO pay dropping 15% last year for the Fortune 200 company CEOs. By the way, this drop in US CEO pay doesn’t include the increased tax rates, which imposes an extra 5% drop in CEO take home pay; and both US and Swiss market indices were down a couple of percentage points last year.
Legislating CEO pay, like it’s the new sin tax, may make for good political soundbites to get elected. However, historical data may suggest it’s not the best course.