Journal of Corporation Law, Forthcoming
60 Pages Posted: 21 Jul 2016 Last revised: 17 Aug 2016
Date Written: August 2016
CEO pay is a controversial issue in America but there was a time, often overlooked today, when chief executives were not paid nearly as much as they are now. From 1940 to the mid-1970s executive pay was modest by today’s standards even though U.S. business was generally thriving. What worked to keep executive pay in check? Economist Thomas Piketty and others credit high marginal income tax rates, leading to calls for a return to a similar tax regime. This paper casts doubt on the impact tax had and also shows that neither the configuration of boards nor shareholder activism played a significant role in constraining executive pay. It emphasizes instead the roles played by strong unions, a different and more circumscribed market for managerial talent, and social norms, explanations that do not easily lend themselves to generating modern policy prescriptions.
Keywords: Tax, Corporate Governance, Executive Compensation, CEO compensation Reform
Suggested Citation: Suggested Citation
Bank, Steven A. and Cheffins, Brian R. and Wells, Harwell, Executive Pay: What Worked? (August 2016). Journal of Corporation Law, Forthcoming; UCLA School of Law, Law-Econ Research Paper No. 16-11; University of Cambridge Faculty of Law Research Paper No. 38/2016; Temple University Legal Studies Research Paper No. 2016-37. Available at SSRN: https://ssrn.com/abstract=2812349