06-17-2026
In May, the Securities and Exchange Commission proposed letting most public companies stop holding say-on-pay votes — the shareholder ballots on executive compensation that became standard after the 2010 Dodd–Frank Act. The proposal has renewed debate over the role of shareholder oversight in executive pay.
New research from the Daniels School of Business’ Lin Qiu suggests the story is more nuanced. Tightening the rules on boards, she finds, does not always make companies better off. In some firms it helps. In others it destroys value — and the damage tends to be worst in exactly the companies with severe governance concerns.
In “Board fiduciary duty, communication, and compensation,” published in Management Science, Qiu, an assistant professor of accounting, builds a formal model of how stricter fiduciary duty rules ripple through executive pay, board oversight, shareholder value and overall corporate welfare. The conclusion cuts against a comfortable intuition: that holding boards to a tougher standard is always good governance.
Most debates over executive pay assume boards are either captured by management or faithful agents of shareholders. Qiu takes a more realistic middle ground: boards are strategic actors with incentives of their own. When evaluating major decisions, such as an acquisition, directors can either investigate independently or rely on the CEO’s private information. Independent scrutiny is costly, so boards may prefer a well-informed and forthcoming CEO to doing all the work themselves. Qiu calls this the board’s “quiet life” incentive: directors may favor arrangements that make it easier to depend on management rather than dig independently.
The model’s first surprise is that higher CEO equity pay can reflect good governance, not weak oversight. Because the CEO has private information but may also favor empire-building, a larger equity stake can align incentives, reduce distortion, and make the CEO more willing to communicate honestly. In this sense, generous equity pay can buy candor and reduce the board’s need for costly investigation.
The model also shows that communication and monitoring are substitutes. When the board can learn key information from the CEO, it monitors less; when communication becomes unreliable, it investigates more. As CEO conflicts grow, the board’s quiet-life incentive weakens, because relying on the CEO becomes less useful. Over a broad middle range, this can make shareholders better off: a more conflicted CEO induces a more diligent board.
Say-on-pay and similar reforms were designed to tighten boards’ fiduciary obligations and curb excessive executive compensation. Qiu’s model shows they can do just that: by limiting board discretion, binding rules tend to reduce CEO equity grants and benefit ordinary, non-insider shareholders.
But their effect on the company as a whole depends on the severity of leadership conflicts. When CEO conflicts are mild, stricter rules can push boards to monitor more actively, raising firm value. When conflicts are severe, however, the effect can reverse. Under looser rules, shareholders may need to give directors stronger equity incentives to pull them away from the quiet life and into serious oversight. Binding rules can weaken that bargain, leading boards to gather less information, exert less effort, and ultimately reduce market value.
That is the paper’s central paradox. The firms most likely to attract regulatory concern may also be the ones where strict rules impose the greatest cost. Even then, the rules can still appear to work: non-insider shareholders receive a larger share. The problem is that the company itself may be worth less. Shareholders win a bigger slice of a smaller pie.
The SEC’s May 2026 proposal makes Qiu’s argument especially timely. If adopted, the proposal would extend scaled disclosure accommodations to non-accelerated filers, including no say-on-pay or say-when-on-pay advisory votes. The SEC estimates that, under the proposed framework, 80 percent of current public companies would be non-accelerated filers. Larger companies would generally remain subject to the existing requirements, and the proposal remains open to public comment.
Viewed through Qiu’s model, a more flexible approach to say-on-pay need not mean weaker governance. If stringent rules can sometimes reduce boards’ incentives to gather information and monitor actively, then allowing some firms more discretion may help preserve value. The paper’s broader point is that regulation effects depend on the firm’s underlying governance problems.
At the same time, the model suggests that firm size is an imperfect guide. What matters most is not whether a company falls above or below a public-float threshold, but how severe its agency conflicts are. In some firms, stricter rules may improve oversight. In others, they may weaken the incentive structure that pushes boards to work harder.
The proposal would also allow companies to keep say-on-pay voluntarily, and Qiu’s framework suggests some may choose to do so. Independent compensation committees, outside pay consultants and engaged shareholders can all help firms credibly commit to oversight, even without a uniform mandate.
The broader lesson is one of calibration. Good governance is not simply about imposing more constraints. It is about designing rules and incentives that help boards, managers and shareholders make better decisions under uncertainty.
