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

Published online by Cambridge University Press:  12 March 2012

CAROLA FRYDMAN  and
RAVEN MOLLOY
CAROLA FRYDMAN*
Affiliation:
Assistant Professor of Economics, Boston University, 270 Bay State Road, Room 307, Boston, MA 02215; and NBER. E-mail: cfrydman@bu.edu.
RAVEN MOLLOY*
Affiliation:
Senior Economist, Federal Reserve Board of Governors, 20th and C Streets NW, Washington, DC 20551. E-mail: raven.s.molloy@frb.gov.
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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 data set on the remuneration of top executives in 246 firms. 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.

Type
ARTICLES
Information
The Journal of Economic History , Volume 72 , Issue 1 , 12 March 2012 , pp. 225 - 251
Copyright
Copyright © The Economic History Association 2012

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