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1 1 (May 4, 2006)

handle is hein.crs/crsaaeh0001 and id is 1 raw text is: Order Code 96-187 Updated May 4, 2006 CRS Report for Congress Received through the CRS Web A Comparison of the Pay of Top Executives and Other Workers Linda Levine Specialist in Labor Economics Domestic Social Policy Division Summary Although the reasons may have changed somewhat over time, the level of top executive compensation long has been of interest to policymakers, shareholders, and employees. Thus far in 2006, attention principally has centered on the pay of chief executives at corporations whose profits have soared and whose product prices have risen substantially (e.g., Exxon Mobil), as well as at corporations where shareholder value has declined greatly (e.g., Pfizer and AT&T). Also during the current decade, scrutiny has focused on senior executives who enjoy sizeable pay packages while misstating their companies' financial condition and thereby not only harming shareholders, but also those employees with pensions invested heavily in their bankrupt employers' stock (e.g., Enron). While the amount of executive salaries, bonuses, and long-term incentives sometimes is looked at in isolation, a comparison often is made between the pay package of senior executives and of employees in general to demonstrate the alleged unfairness of the corporate wage structure. The focus of this report, which will not be updated, is on the size of average executive and worker pay through 2004. Background Both worker and shareholder interests coalesced in the 1980s to bring the issue of top executive pay to the attention of policymakers. From the worker perspective, efforts at curbing labor costs to improve competitiveness were not shared by corporate heads whose large pay raises were thought by some to have contributed to the growth in wage inequality during that period. From the shareholder viewpoint, their interests and those of executives would be more closely aligned by linking raises to company performance through the use of stock-related incentives. The stock-based, pay-for-performance share of executive compensation did indeed increase over time. However, concern arose in the 1990s about rewarding mediocre performance in a booming stock market; executives' attention becoming too focused on Congressional Research Service +o The Library of Congress