Does Shareholder Scrutiny Affect Executive Compensation?

We study whether shareholder scrutiny affects CEO pay. Our identification strategy exploits the fact that recent "say-on-pay" regulation allowed firms to hold votes every two or three years. Depending on their voting frequency, firms experience alternating years where scrutiny on compensation varies following a plausibly exogenous cyclical pattern. In vote-years, firms reduce salaries and golden parachutes, but compensate for these cuts by increasing less-scrutinized compensation such as pensions. Total pay is similar across vote and no-vote years, and pay-for-performance is not stronger in vote years. These results are most consistent with greater window-dressing of compensation in times when firms are subject to heightened shareholder scrutiny.