Murphy, Kevin J. --- "The Politics of Pay: A Legislative History of Executive Compensation" [2012] ELECD 599; in Thomas, S. Randall; Hill, G. Jennifer (eds), "Research Handbook on Executive Pay" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on Executive Pay

Editor(s): Thomas, S. Randall; Hill, G. Jennifer

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849803960

Section: Chapter 1

Section Title: The Politics of Pay: A Legislative History of Executive Compensation

Author(s): Murphy, Kevin J.

Number of pages: 30

Extract:

1 The politics of pay: a legislative history of
executive compensation1
Kevin J. Murphy


1 INTRODUCTION

After a rare decline during the 2008­2009 Great Recession, CEO pay increased sharply
in 2010. The median total realized compensation (including gains from exercising stock
options) for chief executives in S&P (Standard and Poor's) 500 firms rose 35 percent from
2009 levels, the largest year-over-year change in realized pay in at least four decades. This
dramatic increase in realized pay is likely a harbinger of even greater increases to come,
given massive unrealized gains in unvested stock and non-exercisable options that were
granted mid-recession at or near the bottom of the stock market. The revelations of these
pay levels ­ coupled with relatively high rates of unemployment ­ has fueled calls for regu-
lating executive compensation even beyond the reforms imposed by the 2010 Dodd-
Frank Act.
Any debate over whether executive pay should be regulated must begin by recognizing
that CEO pay is already heavily regulated, through tax policies, accounting rules, disclo-
sure requirements, direct legislation, and myriad other rules stretching back nearly a
century. In this chapter, I will explore the legislative history of executive compensation,
starting with Depression-era regulations leading to the 1934 creation of the Securities and
Exchange Commission (SEC), and ending with the ongoing implementation of the Dodd-
Frank Act. I show that many common features and trends can be traced directly to
government attempts to regulate both the level and structure of ...