Executive Compensation: Where We are, and How We Got There

In this study, I summarize the current state of executive compensation, discuss measurement and incentive issues, document recent trends in executive pay in both U.S. and international firms, and analyze the evolution of executive pay over the past century. Most recent analyses of executive compensation have focused on efficient-contracting or managerial-power rationales for pay, while ignoring or downplaying the causes and consequences of disclosure requirements, tax policies, accounting rules, legislation, and the general political climate. A major theme of this study is that government intervention has been both a response to and a major driver of time trends in executive compensation over the past century, and that any explanation for pay that ignores political factors is critically incomplete.