TY  - JOUR
AU  - Frydman,Carola
AU  - Saks,Raven E.
TI  - Executive Compensation: A New View from a Long-Term Perspective, 1936-2005
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14145
PY  - 2008
Y2  - June 2008
UR  - http://www.nber.org/papers/w14145
L1  - http://www.nber.org/papers/w14145.pdf
N1  - Author contact info:
Carola Frydman
Department of Economics
Boston University
270 Bay State Road
Boston, MA 02215
E-Mail: cfrydman@bu.edu

Raven Molloy
Federal Reserve Board of Governors
20th and C Streets NW
Washington, DC 20551
E-Mail: raven.s.molloy@frb.gov
AB  - We analyze the long-run trends in executive compensation using a new panel dataset of top executives in large publicly-held firms from 1936 to 2005, collected from corporate reports.  This historic perspective reveals several surprising new facts that conflict with inferences based only on data from the recent decades.  First, the median real value of compensation was remarkably flat from the end of World War II to the mid-1970s, even during times of rapid economic expansion and aggregate firm growth.  This finding contrasts sharply with the steep upward trajectory of pay over the past thirty years, which coincided with a period of similarly large increases in aggregate firm size.  A second surprising finding is that the sensitivity of an executive's wealth to firm performance was not inconsequentially small for most of our sample period.  Thus, recent years were not the first time when compensation arrangements served to align managerial incentives with those of shareholders.  Taken together, the long-run trends in the level and structure of compensation pose a challenge to several common explanations for the widely-debated surge in executive pay of the past several decades, including changes in firms' size, rent extraction by CEOs, and increases in managerial incentives.
ER  -