Pay Cuts for the Boss: Executive Compensation in the 1940s

42 Pages Posted: 29 Aug 2011 Last revised: 31 Aug 2011

See all articles by Carola Frydman

Carola Frydman

Northwestern University; National Bureau of Economic Research (NBER)

Raven Molloy

Board of Governors of the Federal Reserve System

Date Written: August 2011

Abstract

Executive pay fell during the 1940s, marking the last notable decrease in the past 70 years. We study this decline using a new panel dataset on the remuneration of top executives in 246 firms. We find that government regulation--including explicit salary restrictions and taxation--had, at best, a modest effect on executive pay. By contrast, a decline in the returns to firm size and an increase in the power of labor unions contributed greatly to the reduction in executive compensation relative to other workers' earnings from 1940 to 1946. The continued decrease in relative executive pay remains largely unexplained.

Suggested Citation

Frydman, Carola and Molloy, Raven, Pay Cuts for the Boss: Executive Compensation in the 1940s (August 2011). NBER Working Paper No. w17303. Available at SSRN: https://ssrn.com/abstract=1918634

Carola Frydman (Contact Author)

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Raven Molloy

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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