Learning from the past

Trends in executive compensation over the 20th century

Carola Frydman*

*Corresponding author for this work

Research output: Contribution to journalArticle

5 Citations (Scopus)

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.

Original languageEnglish (US)
Pages (from-to)458-481
Number of pages24
JournalCESifo Economic Studies
Volume55
Issue number3-4
DOIs
StatePublished - Dec 4 2009

Fingerprint

learning
trend
labor market
evidence
manager
market
time
20th century
Executive compensation
Executive pay
Managers
Factors
General Electric
Labour market
Managerial power
CEO pay

Keywords

  • Corporate governance
  • Executive compensation
  • Managerial incentives
  • Market for managers

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Economics and Econometrics

Cite this

@article{09f1b5945c6d4532bbb945ffeedebcfc,
title = "Learning from the past: Trends in executive compensation over the 20th century",
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.",
keywords = "Corporate governance, Executive compensation, Managerial incentives, Market for managers",
author = "Carola Frydman",
year = "2009",
month = "12",
day = "4",
doi = "10.1093/cesifo/ifp021",
language = "English (US)",
volume = "55",
pages = "458--481",
journal = "CESifo Economic Studies",
issn = "1610-241X",
publisher = "Oxford University Press",
number = "3-4",

}

Learning from the past : Trends in executive compensation over the 20th century. / Frydman, Carola.

In: CESifo Economic Studies, Vol. 55, No. 3-4, 04.12.2009, p. 458-481.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Learning from the past

T2 - Trends in executive compensation over the 20th century

AU - Frydman, Carola

PY - 2009/12/4

Y1 - 2009/12/4

N2 - 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.

AB - 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.

KW - Corporate governance

KW - Executive compensation

KW - Managerial incentives

KW - Market for managers

UR - http://www.scopus.com/inward/record.url?scp=70849123475&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=70849123475&partnerID=8YFLogxK

U2 - 10.1093/cesifo/ifp021

DO - 10.1093/cesifo/ifp021

M3 - Article

VL - 55

SP - 458

EP - 481

JO - CESifo Economic Studies

JF - CESifo Economic Studies

SN - 1610-241X

IS - 3-4

ER -