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Changing board behaviour: The role of the ‘Two Strikes’ rule in improving the efficacy of Australian Say‐on‐Pay

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  • James Borthwick
  • Aelee Jun
  • Shiguang Ma

Abstract

This article analyses whether the transition from the 2004 CLERP 9 advisory Say‐on‐Pay regime to the ‘Two Strikes’ rule in 2012 influenced CEO pay in Australian firms. Analysing a panel of 2,074 firm‐years (2005–2015), we find that (i) CEO pay is a positive predictor of shareholder dissent; (ii) firm performance has a reducing effect on shareholder dissent; (iii) excessive shareholder dissent moderated CEO pay under the ‘Two Strikes’ rule relative to the CLERP 9 regime, and (iv) the market responded favourably to the introduction of the ‘Two Strikes’ rule and negatively to ‘strike’ instances after its introduction.

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  • James Borthwick & Aelee Jun & Shiguang Ma, 2020. "Changing board behaviour: The role of the ‘Two Strikes’ rule in improving the efficacy of Australian Say‐on‐Pay," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(S1), pages 827-876, April.
    • Handle: RePEc:bla:acctfi:v:60:y:2020:i:s1:p:827-876
    DOI: 10.1111/acfi.12381
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