Since we began tracking executive pay 10 years ago, the public image of CEOs has risen and fallen, roughly in tandem with the economy. In the early 1990s, with the economy in recession, CEOs and their lavish pay packages were a potent political issue, the object of scorn from presidential candidates and members of Congress alike. In the late 1990s, as the stock market took off, CEOs became modern-day heroes. Few really seemed to mind that CEO pay was rising much faster than worker pay, much faster even than corporate profits or the stock market.

Our CEO pay reports detailed these trends, and as well we focused on the pay premiums that flowed to CEOs who headed up corporations that laid off workers, shifted jobs overseas, or reduced their federal tax bills to less than zero.

Meanwhile, the business press noted with increasing alarm the fact that CEO compensation bore no relationship to company performance. But as stock portfolios swelled in the late 1990s and new investors were enticed into equity markets, skepticism about a CEO’s motives usually took a back seat to the irrational exuberance of a stock market bubble.

Some investors grumbled when a down year for the stock market in 2000 did nothing to stem the growth in CEO pay, but the view that CEOs in general were fairly paid remained prevalent until the accounting scandals of 2002 demonstrated that the late 1990s stock market boom was built on a foundation of fantasy and lies. In retrospect, given the poisonous incentives to cook the books that were set up by stock options, our annual reports on skyrocketing CEO pay in the late 1990s were actually warning lights on the dashboard – indicators that something was seriously wrong in the economy, and an example of how rising inequality and economic instability go hand-in-hand.

The accounting scandals had a profound effect on public attitudes toward CEOs and executive pay. A Harris poll taken in October 2002 found that “87 percent of all adults believe that most top company managers are paid more than they deserve, and that they become rich at the expense of ordinary workers.” The poll also found that two-thirds of respondents believed that rewards in the workplace were distributed less fairly than they had been five years before.

This year, we shine our CEO pay spotlight on four areas. First, in the midst of the weakest economic recovery on record in terms of jobs, we find that CEOs who announce major layoffs are well rewarded in the following year, indicating that CEOs continue to win as workers lose.

Another way CEOs win while workers lose is found in the state of the nation’s private pension programs, which as a whole are seriously underfunded. While the employees of companies with inadequate pension reserves face an uncertain retirement, their bosses are earning significantly more than typical CEOs.

Next, we turn to the problem of corporations not paying their fair share of the cost of government. Even as state and federal governments bleed red ink, the corporate tax burden has dropped to its lowest level since World War II. Stock options – the leading cause of the CEO pay explosion and a potent incentive for book-cooking — continue to provide corporations with a huge tax write-off, even though they are not required to be carried as an expense on financial statements. The lost tax revenue due to the use of stock options is substantial, and had this loophole been closed, it could have reduced the need to cut important government services or raise taxes on other taxpayers.

We also look at another leading corporate tax dodge, the offshore tax haven, and find that the 24 Fortune 500 companies with the most subsidiaries in offshore tax havens pay their CEOs 87 percent more than the typical CEO. The report concludes with a summary of initiatives and recommendations designed to strengthen our nation’s economy and democracy by reducing the extreme economic disparity between corporate executives and the rest of us.


Explore all Executive Excess reports from 1994 onward.

The Institute for Policy Studies is an independent center for progressive research and education founded in Washington, DC in 1963. IPS scholaractivists are dedicated to providing politicians, journalists, academics and activists with exciting policy ideas that can make real change possible. United for a Fair Economy is a national, independent, non-partisan organization founded in 1994 to focus public attention and action on economic inequality in the United States—and the implications of inequality on American life and labor. United for a Fair Economy provides educational resources, works with grassroots organizations and supports creative and legislative action to reduce inequality.

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