We examine the driving forces of CEO to median employee pay ratios from the macroperspective using a sample of large corporations included in the DJIA index from 1949 to 2022. We find that CEO-employee pay ratios increase with the Industry Production Index and inflation rate, but decrease with GDP per capita growth rate, unemployment rate, stock market and industry trends. Our results also show that CEO pay structure changes from salary and bonus-dominated to option and stock-dominated pay enable CEOs to enjoy a much better pay package compared to lower-level employees, while executive pay-related regulations in the 2000s have lowered CEOemployee pay ratios. Our findings provide new insights to various stakeholders, regulators, the public and media on this long-debated social and economic issue.
Ning et al. (Fri,) studied this question.