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Learning from the Past: Trends in Executive Compensation over the 20th Century

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  • Carola Frydman

Abstract

In recent years, a large academic debate has tried to explain the rapid rise in CEO pay experienced over the past three decades. In this article, I review the main proposed theories, which span views of compensation as the result of a competitive labor market for executives to theories based on excess of managerial power. Some of these hypotheses have found support in cross-sectional evidence, but it has proven more difficult to determine which factors have caused the observed changes in pay over time. An alternative strategy is to evaluate the fit of plausible explanations out of sample by contrasting them with the evolution in executive pay and the market for managers during earlier time periods. A case study of General Electric suggests that evidence for earlier decades can speak of the recent trends and reveals the limitations of current explanations to address the long-run data. (JEL codes: G30, J33, M52, N82) Copyright The Author 2009. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

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Bibliographic Info

Article provided by CESifo in its journal CESifo Economic Studies.

Volume (Year): 55 (2009)
Issue (Month): 3-4 ()
Pages: 458-481

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Handle: RePEc:oup:cesifo:v:55:y:2009:i:3-4:p:458-481

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Cited by:
  1. Paula Faria & Franscisco Vitorino Martins & Elísio Brandão, 2013. "Executive Compensation: Pay-for-Performance in High-Technology Firms," FEP Working Papers 517, Universidade do Porto, Faculdade de Economia do Porto.
  2. Paula Faria & Franscisco Vitorino Martins & Elísio Brandão, 2013. "The level of CEO compensation for the short and long-term - a view on high-tech firms," FEP Working Papers 519, Universidade do Porto, Faculdade de Economia do Porto.
  3. Paula Faria & Franscisco Vitorino Martins & Elísio Brandão, 2013. "CEO compensation in high-tech firms and changes in the SFAS No 123 (R)," FEP Working Papers 518, Universidade do Porto, Faculdade de Economia do Porto.

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