Executive compensation, fat cats, and best athletes

Income gains in the top 1 percent are the primary cause for the rapid growth in U.S. inequality since the late 1970s. Managers and executives of firms account for a large proportion of these top earners. Chief executive officers (CEOs), in particular, have seen their compensation increase faster tha...

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Bibliographic Details
Published in:American sociological review 2015-04, Vol.80 (2), p.299-328
Main Authors: Kim, Jerry W, Kogut, Bruce, Yanga, Jae-Suk
Format: Article
Language:English
Subjects:
Athletes
Benchmarking
Boards of directors
Business structures
Chief executive officers
Comparative analysis
Compensation
Computer Networks
Contrafactuals
Diffusion
Education
Einkommensentwicklung
Einkommenshöhe
Einkommensunterschied
Elite
Executive compensation
Executives
Executives (Business)
Führungskraft
Human capital
Income
Income Distribution
Income Inequality
Inequality
Interlocking Directorates
Market value
Modeling
Networks
Peer Group
Peer Groups
Peer Relations
Social Comparison
Social Networks
Soziale Norm
Soziale Ungleichheit
Soziales Netzwerk
Statistical analysis
Studienabschluss
U.S.A
Ursache
USA
Vorstand
Wertewandel
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Summary:Income gains in the top 1 percent are the primary cause for the rapid growth in U.S. inequality since the late 1970s. Managers and executives of firms account for a large proportion of these top earners. Chief executive officers (CEOs), in particular, have seen their compensation increase faster than the growth in firm size. We propose that changes in the macro patterns of the distribution of CEO compensation resulted from a process of diffusion within localized networks, propagating higher pay among corporate executives. We compare three possible explanations for diffusion: director board interlocks, peer groups, and educational networks. The statistical results indicate that corporate director networks facilitate social comparisons that generate the observed pay patterns. Peer and education network effects do not survive a novel endogeneity test that we execute. A key implication is that local diffusion through executive network structures partially explains the changes in macro patterns of income distribution found in the inequality data.
ISSN:0003-1224
1939-8271
DOI:10.1177/0003122415572463