NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Carola Frydman, Raven Molloy

NBER Working Paper No. 17303
Issued in August 2011
NBER Program(s):   CF   DAE   LS

Executive pay fell during the 1940s, marking the last notable decrease in the past 70 years. We study this decline using a new panel dataset on the remuneration of top executives in 246 firms. We find that 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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Document Object Identifier (DOI): 10.3386/w17303

Published: 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(01), pages 225-251, March.

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