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

By Carola Frydman, Raven E. Saks. 2010

645 citations recorded by the source corpus.

We analyze the long-run trends in executive compensation using a new panel dataset of top executives in large firms from 1936 to 2005. In sharp contrast to the well-known steep upward trajectory of pay of the past 30 years, the median real value of compensation was remarkably flat from the late 1940s to the mid-1970s, highlighting a weak relationship between compensation and aggregate firm size. While this correlation has changed considerably over the century, the cross-sectional relationship between pay and firm size has remained stable. Another surprising finding is that the sensitivity of changes in 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. Overall, these trends pose a challenge to several common explanations for the recent surge in executive pay.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/e3e31d860c614d902297f2195da205bec3df3aba

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

In Strategy and Management

Citations in the corpus

Bonus Culture: Competitive Pay, Screening, and Multitasking (2016, background): “They are also in line with Frydman’s ð2007Þ evidence linking increased mobility ðskills portabilityÞ of corporate executives to the rise in both the level and the variance in their compensation ðsee also Bloom and Van Reenen 2010; Frydman and Saks 2010; Bell and Van Reenen 2013Þ.”
Managerial Attributes and Executive Compensation (2011, neutral): “This calculation 15 Frydman and Saks (2010) also test the relation between compensation and firm size using historical compensation data ranging from 1936 to 2005 for the largest 50 firms.”
The One Percent (2014, background): “Research on CEO compensation addresses changing use of stock options (Bebchuk & Grinstein 2005, Frydman & Saks 2010, McCall & Percheski 2010), and the fascinating new study of top wealth holders’ politics begins to fill this gap (Page et al. 2013).”
Executive Compensation: A Survey of Theory and Evidence (2017, neutral): “2The Frydman and Saks (2010) sample contains the largest 50 rms in 1940, 1960 and 1990 (for a total of 101 rms).”
Long-Run Trends in the Distribution of Income and Wealth (2014, neutral): “Frydman and Saks (2007), study the ratio of CEO to worker pay in the U.”
Corporate governance and company performance across Sub-Saharan African countries (2013, background): “However, past research has shown that these expectations are not universally met (Tosi et al., 2000, Frydman and Saks, 2010).”