Shareholder votes on executive compensation at U.S. firms have resulted in an average single-year pay drop for CEOs of about $7.3 million or about 38 percent in companies where pay was excessive, according to a new study to be presented by the American Accounting Association.

Fabrizio Ferri

The study is scheduled to be presented at the AAA’s annual meeting in San Francisco on Aug. 1-4. The study cites the example of Robert I. Toll, who stepped down as CEO of luxury home builder Toll Brothers in June. He received a 73 percent pay cut, from $26 million to $7 million after owners of a quarter of Toll Brothers shares withheld their votes to re-elect the head of the company’s compensation committee.

Companies that sustained hefty CEO  pay reductions during the study's time span of 1997-2007 included Yahoo, UnitedHealth, United Natural Foods, Sanmina-Sci, Saks Inc, Sprint, Qwest Communications, Legg Mason, Lennar, KB Home, Constellation Energy, and Apple.

In addition, the study found that pay-design proposals by institutional investors resulted in average pay reductions of about $2.3 million in companies with excessive CEO pay. Excessive pay is an amount greater than what would be expected on the basis of a number of standard economic determinants, including firm size, return on assets, stock performance, and industry.

The findings would seem to bode well for the increase in shareholder say on pay likely to result from the financial regulatory reform bill that President Obama signed into law on July 21. The new legislation requires shareholder advisory votes on executive pay at least once every three years (and, subject to the decision of the shareholders, possibly as often as every year) in all companies or categories of companies not specifically exempted by the SEC.

"This study casts doubt on the two most frequent criticisms of increased shareholder say on pay -- either that it will be largely ineffective or that it will lead to radical changes dictated by unions or other special-interest groups," said Fabrizio Ferri of New York University, who carried out the new research with Yonca Ertimur of Duke University and Volkan Muslu of the University of Texas at Dallas.