Fatter Cats: Executive Pay and American Inequality

By Colin Gordon - April 24, 2014

Executive pay has risen dramatically—both in absolute terms and in relation to median wages—across the last generation. The spike in executive salaries is both a key driver of inequality at the top end of the income spectrum (about half of the “1 percent” are executives or managers at non-financial firms) and a symbolic marker of social norms in our “winner-take-all” economy.

Conservative economists have tried to spin this as a triumph of market forces, manifesting the ability of superstar innovators to pull away from the pack in a global, wired economy. But there is little evidence to sustain this view. Gains in executive pay have dramatically outstripped gains in educational attainment and bear little relation to merit or productivity, as the CEOs of successful and failed enterprises alike have made off like bandits. Instead, the trajectory of CEO pay is a political story, embedded in tax policy and in the slow collapse of meaningful corporate regulation or governance.