In 1933, the U.S. government asked 2,000 corporations listed on stock exchanges in New York to disclose how much they paid their top bosses — its first effort at making the pay of executives more visible.
The idea was to encourage the “more conservative management of industry,” The New York Times reported when it published some of the results on its front page.
Instead, according to a study by Alexandre Mas, a Princeton economist, the opposite happened: Average chief executive compensation rose, mostly because the lower-paid executives — now realizing that they were, indeed, lower-paid — pushed for raises that brought their compensation in line with their higher-paid peers’.
Nonetheless, the belief that revealing chief executive pay would help keep executive compensation in check stuck around, and got more complex.
In 2018, the Securities and Exchange Commission required companies to publish not only executive pay, but also a ratio that describes how the pay of a company’s leader compared with the pay of its median worker.
Persons:
—, Alexandre Mas, ’
Organizations:
The New York Times, Securities and Exchange Commission
Locations:
U.S, New York, Princeton