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

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  • FRYDMAN, CAROLA
  • MOLLOY, RAVEN

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.

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  • Frydman, Carola & Molloy, Raven, 2012. "Pay Cuts for the Boss: Executive Compensation in the 1940s," The Journal of Economic History, Cambridge University Press, vol. 72(1), pages 225-251, March.
    • Handle: RePEc:cup:jechis:v:72:y:2012:i:01:p:225-251_00
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    Cited by:

    1. Callaway, Brantly & Collins, William J., 2018. "Unions, workers, and wages at the peak of the American labor movement," Explorations in Economic History, Elsevier, vol. 68(C), pages 95-118.
    2. Carola Frydman, 2019. "Rising Through the Ranks: The Evolution of the Market for Corporate Executives, 1936–2003," Management Science, INFORMS, vol. 65(11), pages 4951-4979, November.
    3. Henry S Farber & Daniel Herbst & Ilyana Kuziemko & Suresh Naidu, 2021. "Unions and Inequality over the Twentieth Century: New Evidence from Survey Data," The Quarterly Journal of Economics, Oxford University Press, vol. 136(3), pages 1325-1385.
    4. Alexandre Mas, 2016. "Does Disclosure affect CEO Pay Setting? Evidence from the Passage of the 1934 Securities and Exchange Act," Working Papers 2016-5, Princeton University. Economics Department..
    5. Frydman, Carola & Papanikolaou, Dimitris, 2018. "In search of ideas: Technological innovation and executive pay inequality," Journal of Financial Economics, Elsevier, vol. 130(1), pages 1-24.
    6. Bengtsson, Erik & Molinder, Jakob, 2022. "Incomes and Income Inequality in Stockholm, 1870–1970: Evidence from Micro Data," Lund Papers in Economic History 240, Lund University, Department of Economic History.

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    More about this item

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General
    • N32 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: 1913-

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