Joseph Kieffer is a Research Analyst at Equilar. This post is based on an Equilar memorandum by Mr. Kieffer.
Since the introduction of Say on Pay, shareholders have maintained a larger degree of influence over CEO compensation. The ability to vote in an advisory capacity on CEO compensation strengthened the voice of shareholders. However, a particularly interesting case arises when the CEO occupies the position of the chair of the board. Potentially, this could create a conflict of interest between the board and management, where the CEO-chair has significant leverage over compensation decisions. It is partly for this reason, in combination with the board’s desire for independent oversight of management, that shareholders often take an active stance in making decisions about CEO-chairs.