Definition
Say-on-Pay
Say-on-pay is the principle that shareholders should be able to vote on the remuneration of a company's senior executives and directors.
Under the Companies Act and SEBI LODR, shareholder approval is required for executive and director remuneration above prescribed limits, and for the overall remuneration policy framed by the nomination and remuneration committee. This gives shareholders a voice on whether pay is fair relative to performance.
Proxy advisory firms scrutinise pay resolutions closely, and 'against' recommendations have led companies to revise excessive packages. Say-on-pay is a key mechanism for curbing remuneration that is misaligned with shareholder interests.
Related terms
- Nomination and Remuneration CommitteeThe NRC is a board committee that decides on board appointments and the pay of directors and senior management.
- Proxy Advisory FirmA proxy advisory firm analyses resolutions at shareholder meetings and recommends how institutional investors should vote.
- Clawback (Compensation)A clawback provision lets a company recover compensation already paid to executives if results are later restated or misconduct is found.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.