'No Man can be Worth $1,000,000 a Year': The Fight Over Executive Compensation in 1930s America

Abstract

Challenges to executive compensation occupy today’s headlines, but as this Article shows fights over executive compensation have a long history. Executive compensation first took the national stage in the 1930s, when revelations of corporate chieftains’ million-dollar-a-year pay packages sparked outrage and campaigns to cap executive compensation through measures including new requirements for pay disclosure, litigation against boards of directors, punitive taxation, and direct government limits on pay. These campaigns forced lawmakers and courts to wrestle not only with angry voters and shareholders but also with fundamental questions: how, in an era when ownership and control had been separated, could the managers of the modern corporation be controlled? How much did executives, or anyone, deserve to be paid? And, who would decide? The fights revealed deep tensions between some legislators’ and courts’ desire to subject executive pay to a level of scrutiny and control not seen before or since, and their reluctance to become to entangled with the internal workings of corporations. The story told here is, in part, of the rise and fall of ambitious attempts to curb executive compensation and the success of more modest innovations. This Article, the first legal history of this overlooked episode, not only recounts the 1930s struggles but draws a contrast between the wide-ranging battles over compensation of seventy years ago and the today’s more narrow debates.

Keywords: corporate governance, managers, executives, disclosure, executive compensation, 1930s