Reducing executive compensation to historical levels would dramatically reduce executive compensation as compared to net income: Compensation of top executives as a percentage of firms' net income
| Metric | Compensation of top executives as a percentage of net income |
|---|---|
| Actual value, average over past 5 years | 6.0% |
| Actual value, average 1993—1997 | 5.4% |
| Counterfactual, if executive pay was halved | 1.9% |
| Counterfactual, if executive pay was limited to 20 times as high as median worker | 1.1% |
Notes: Executives include those approximately five executive officers for which Compustat Execucomp data is available. For years in which executive turnover occurred, the sum of compensation to both the in-coming and out-going executives is included. Executive compensation is computed using the “options realized” compensation series for executives at the top 350 U.S. firms ranked by sales. The “options realized” series includes salary, bonus, restricted stock grants, options realized, and long-term incentive payouts. Annual compensation of the median workers in the key industry of the firms in the sample is determined using NAICS codes, consisted with a methodology described in Mishel and Schieder (2018). Industry-specific ratios are based on averaging specific firm ratios and not the ratio of averages of CEO and worker compensation.
Source: Authors’ analysis of data from Compustat’s ExecuComp database, the Federal Reserve Economic Data (FRED) database from the Federal Reserve Bank of St. Louis, the Bureau of Labor Statistics’ Current Employment Statistics data series, and the Bureau of Economic Analysis NIPA table
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