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The Politics of Pay: A Legislative History of Executive Compensation

42 Pages Posted: 26 Aug 2011  

Kevin J. Murphy

University of Southern California - Marshall School of Business; USC Gould School of Law

Date Written: August 24, 2011

Abstract

This paper explores the legislative history of executive compensation, starting with Depression-era disclosure regulations and ending with the ongoing implementation of the Dodd-Frank Act. Over the past 80 years, Congress has imposed tax policies, accounting rules, disclosure requirements, direct legislation, and myriad other rules to regulate executive pay. With few exceptions, the regulations have generally been either ineffective or counterproductive, typically increasing (rather than reducing) CEO pay and leading to a host of unintended consequences, including the explosion in perquisites in the 1970s, golden parachute plans in the 1980s, stock options in the 1990s, and restricted stock in the 2000s. Part of the problem is that regulation – even when well intended – inherently focuses on relatively narrow aspects of compensation allowing plenty of scope for costly circumvention. A larger part of the problem is that the regulation is often misintended, driven by political rather than shareholder agendas.

Keywords: Executive Compensation, Regulation, Disclosure, Stock Options, Corporate Governance

JEL Classification: G34, G38, J33, M48, M52

Suggested Citation

Murphy, Kevin J., The Politics of Pay: A Legislative History of Executive Compensation (August 24, 2011). Marshall School of Business Working Paper No. FBE 01.11. Available at SSRN: https://ssrn.com/abstract=1916358 or http://dx.doi.org/10.2139/ssrn.1916358

Kevin J. Murphy (Contact Author)

University of Southern California - Marshall School of Business ( email )

BRI 308, MC 0804
Los Angeles, CA 90089-0804
United States
213-740-6553 (Phone)
213-740-6650 (Fax)

USC Gould School of Law

699 Exposition Boulevard
Los Angeles, CA 90089
United States

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