CEO and top managerial pay depresses returns to shareholders: Top managerial pay as a share of corporate net income, three scenarios, averaged across 2013–2017
|% of net income|
|Top managerial pay halved||3.0%|
|Top managerial pay returned to 1965 ratios||0.4%|
Notes: For the first bar, we take the average salaries of the top five executives at a company, sum them, and divide by the company’s net income. We then average this (unweighted) ratio across the 350 largest firms. For the second bar, we assume pay for the top five executives is cut in half. The last bar reduces pay for the top five executives by the ratio of relative CEO pay in 1965 to relative CEO pay in 2017.
Source: Authors’ analysis of data from Compustat’s ExecuComp database