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Executive Compensation: A New View from a Long-Term Perspective, 1936--2005

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  • Carola Frydman
  • Raven E. Saks

Abstract

We analyze the long-run trends in executive compensation using a new dataset of top officers of large firms from 1936 to 2005. The median real value of compensation was remarkably flat from the late 1940s to the 1970s, revealing a weak relationship between pay and aggregate firm growth. By contrast, this correlation was much stronger in the past thirty years. This historical perspective also suggests that compensation arrangements have often helped to align managerial incentives with those of shareholders because executive wealth was sensitive to firm performance for most of our sample. These new facts pose a challenge to several common explanations for the rise in executive pay since the 1980s. Published by Oxford University Press 2010, Oxford University Press.

Suggested Citation

  • Carola Frydman & Raven E. Saks, 2010. "Executive Compensation: A New View from a Long-Term Perspective, 1936--2005," The Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 2099-2138.
    • Handle: RePEc:oup:rfinst:v:23:y:2010:i:5:p:2099-2138
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    File URL: http://hdl.handle.net/10.1093/rfs/hhp120
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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • N82 - Economic History - - Micro-Business History - - - U.S.; Canada: 1913-

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