As a concept, so-called "say on pay" provisions--that is, non-binding shareholder votes--would seem to be only "slightly better than nothing" at limiting executive compensation. And this surely explains why Obama, Geithner, and other officials have come under fire for favoring this approach over something bolder.
Yet it is possible to find some limited support for the effectiveness of say on pay. Studying about 1,300 shareholder proposals and vote-no campaigns in the US between 1997 and 2007, Yonca Ertimur of Duke, Fabrizio Ferri of Harvard, and Volkan Muslu of the University of Texas found that dissatisfaction votes do appear to reduce excess CEO pay: Firms that paid their top execs more than fundamentals would warrant reduced CEO compensation by an average of $3.1 million after a dissatisfaction vote.
While the results are largely driven by vote-no campaigns, the authors also give some credit to say on pay proposals: "a general dissatisfaction vote against the compensation committee’s choices—such as a vote-no campaign and a say on pay vote—is much more effective at dealing with excessive CEO pay" than other proposals that fall under the category of "micromanaging" executive pay. (This would include caps on CEO/worker pay ratios or on bonus/salary ratios. The reason that this group of proposals is ineffective is that they almost never get approved.)
Other research looking into the effects of say on pay legislation in the UK has shown that it helped curb the phenomenon of CEOs getting raises even when their company performed poorly. But say on pay didn't prevent excessive pay in industries that were experiencing good stock returns as a group.
Taken together, the studies suggest say on pay would not have prevented financial company CEOs from earning outsized compensation during the credit boom, but that these measures can impose a bit of cosmic justice once the party ends.