US shareholders 'speaking out over executive pay'

Investors are beginning to use their "say on pay" as a platform to reject excessive pay awards for US executives.

This is according to the Wall Street Journal, which claims that recent events at the annual meetings of large firms have indicated a "significant shift in the relationship between corporate boards and shareholders".

Executive pay strategies at Motorola and Occidental Petroleum were voted down by shareholders last week.

Although such votes are not binding, corporate governance analysts point out that they draw attention to issues and force directors to consider factors that could otherwise be ignored.

In this respect, the US is following in the footsteps of the UK, where say on pay votes have been part of the relationship between boards and investors since 2003.

Stephen Davis, executive director of the Yale School of Management's Millstein Center for Corporate Governance and Performance, explained how the requirement has affected the pay strategies of British firms.

He told the publication: "It did make progress in better aligning pay with performance.

"It pried open a dialogue between boards and investors, [prompting boards to] build into their routine preparations an outreach to investors."