Show Me the Money-cut: Shareholder Dividend Suspensions and Voluntary CEO Pay Cuts during the COVID Pandemic

Denis L. Alves, Miles B. Gietzmann*, Bjørn N. Jørgensen

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Many US companies with December 31, 2019 as their fiscal year end had their Annual Shareholder Meeting scheduled (usually online) during the COVID pandemic. Unexpectedly faced with significant changes in operating environments, some companies decided to suspend shareholder dividend payments. In normal circumstances, this would be interpreted as a very negative event and shareholders could be expected to respond adversely at the annual meeting. However, we investigate whether CEOs were able to maintain shareholder support by offering a previously unheard of response of “sharing the pain”, committing to cut their own pay following a dividend suspension. At issue is whether investors acted as if they updated their inferences using the new voluntary pay-cut decision to infer the extent to which the CEOs underlying personality type was well matched to crisis management. We estimate an instrumental variables model in which the dividend suspension is used as an instrument for the endogenous pay cut variable.
Original languageEnglish
Article number106898
JournalJournal of Accounting and Public Policy
Number of pages10
ISSN0278-4254
DOIs
Publication statusPublished - 15 Sep 2021

Bibliographical note

Epub ahead of print. Published online: 15 September 2021

Keywords

  • Covid-19
  • Say-on-Pay
  • Dividends suspension
  • Executive pay-cut

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