Abstract:     
Shareholder and public dissatisfaction with executive compensation has led to calls for an annual shareholder advisory vote on a firm's compensation practices and policies, so-called say on pay. Governance activists have recently begun to use the proxy machinery to target specific firms for such a shareholder vote. Some governance activists have also backed federal legislative proposals that would implement say on pay generally for US public companies. This paper assesses the case for such a mandatory federal rule in light of the UK experience with a similar regime adopted in 2002. The best argument for a mandatory rule is that it would destabilize pay practices that have produced excessive compensation and that would not yield to firm-by-firm pressure. This has not been the UK experience; pay continues to increase. The most serious concern is the likely evolution of a best compensation practices regime which would embed normatively-opinionated practices that would ill-suit many firms. There is some evidence of a UK evolution in that direction. This problem might be more pronounced in the US because US shareholders are even more likely than their UK counterparts to delegate judgments over compensation practices to a small number of proxy advisors who themselves will be economizing on analysis. The paper argues that the jury-rigged system now operating to push for compensation reform in US firms in light of the SEC's robust new compensation disclosure regime should be permitted to operate for a few more years before mandatory say-on-pay is seriously considered. In any event, if compensation levels are unacceptable as social matter rather than as a pay-for-performance matter, then general tax law changes would be more productive than tinkering with corporate governance.