Securities and Exchange Commission regulations that aimed to empower stockholders and bring CEO’s salaries closer in line with their performance have flopped, according to a study co-authored by Margaret B. Shackell, assistant professor of accountancy.
In 1992 the SEC began requiring companies to make it easier for outsiders to learn details of executives’ compensation packages. The new regulations also gave shareholders the right to put the packages to a vote.
The researchers say the rules have mainly increased the likelihood that small, unsophisticated shareholders with single-issue political agendas will try to advance proposals that make poor business sense. Also, the companies drawing the most shareholders proposals haven’t been the ones with CEO salaries furthest out of line with performance, they’ve merely been the ones most visible politically.
Shackell’s research partners were Karen Nelson, assistant professor of accounting at Stanford University, and Marilyn Johnson, associate professor of accounting at Michigan State University.