Political Systems and Governance
Peer reviewed
Abstract
Abstract
We study the standard-setting role of proxy advisors when their preferences diverge from regulatory mandates and shareholders’ choices. The say-on-pay (SOP) regulation in 2011 allowed U.S. firms to adopt non-annual voting schedules, whereas proxy advisors strongly preferred annual voting. We show that they leverage negative recommendations in compensation committee member elections (CMEs) as an alternative channel for expressing compensation-related concerns in non-SOP years. Among firms that hold triennial SOP votes, negative recommendations in CMEs are significantly more frequent during non-SOP years. Moreover, proxy advisors promote their standards even more strongly in firms where their preferences are less aligned with the voting choices of shareholders, highlighting their standard-setting role even when unpopular.
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@article{Cai2026facto,
title = {A de facto referendum: how proxy advisors set their standards through director elections},
author = {Hong Cai and Xinyu Shi and Han Wu},
journal = {European Accounting Review},
year = {2026},
doi = {10.1080/09638180.2026.2735888},
url = {https://doi.org/10.1080/09638180.2026.2735888}
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