Executive Pay: What Worked?

60 Pages Posted: 21 Jul 2016 Last revised: 17 Aug 2016

Steven A. Bank

University of California, Los Angeles (UCLA) - School of Law

Brian R. Cheffins

University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)

Harwell Wells

Temple University - James E. Beasley School of Law

Date Written: August 2016

Abstract

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

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

Steven A. Bank (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States
310-794-7601 (Phone)

Brian R. Cheffins

University of Cambridge - Faculty of Law ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom
+44 1223 330084 (Phone)
+44 1223 330055 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Harwell Wells

Temple University - James E. Beasley School of Law ( email )

1719 N. Broad Street
Philadelphia, PA 19122
United States
215-204-1183 (Phone)
215-204-1185 (Fax)

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