Adam Tooze’s most recent Chartbook newsletter opens with this study on CEO pay.

Since CEO pay is mostly stock based, calculating it is not entirely straightforward because the value of stocks is continually changing. We use two measures to give a fuller picture: a backward-looking measure—realized compensation—and a forward-looking measure—granted compensation. Using the realized compensation measure, compensation of the top CEOs shot up 1,209.2% from 1978 to 2022 (adjusting for inflation). Top CEO compensation grew roughly 28.1% faster than stock market growth during this period and far eclipsed the slow 15.3% growth in a typical worker’s annual compensation. CEO granted compensation rose 1,046.9% from 1978 to 2022.

In this study, “the CEOs examined [...] head large firms.” But even within startups, it’s funny how so many founders give themselves a C-level title when there’s really nobody else to manage or even a real business underneath them.

CEO compensation has even been breaking away from that of other very highly paid workers. Over the last three decades, compensation grew far faster for CEOs than it did for the top 0.1% of wage earners (those earning more than 99.9% of wage earners). CEO compensation in 2021 (the latest year for which data on top 0.1% wage earners are available) was 7.68 times as high as wages of the top 0.1% of wage earners, a ratio 4.1 points greater than the 3.61-to-1 average CEO-to-top-0.1% ratio over the 1951–1979 period.

The fact that CEO compensation has grown much faster than the pay of the top 0.1% of wage earners indicates that CEO compensation growth does not simply reflect a competitive race for skills (the “market for talent”) that would also increase the value of highly paid professionals more generally. Rather, the growing pay differential between CEOs and top 0.1% earners suggests the growth of substantial economic rents (income not related to a corresponding growth of productivity) in CEO compensation. CEO compensation does not appear to reflect the greater productivity of executives but their ability to extract concessions from corporate boards—a power that stems from dysfunctional systems of corporate governance in the United States. But because so much of CEOs’ income constitutes economic rent, there would be no adverse impact on the economy’s output or on employment if CEOs earned less or were taxed more.

The report also provides some policy recommendations to reverse the trend:

Ideally, tax reforms would be paired with changes in corporate governance:

• Implementing higher marginal income tax rates at the very top would limit rent-seeking behavior and reduce the incentives for executives to push for such high pay.
• Another option is to set corporate tax rates higher for firms that have higher ratios of CEO-to-worker compensation. Clifford (2017) recommends setting a cap on executive compensation and taxing companies on any amount over the cap, similar to the way baseball team payrolls are taxed when salaries exceed a cap.

Dysfunctional governance can explain income inequality within businesses as well as within American society at large. But the solution for income inquality in both situations is the same! If taxing the 1% is an argument for more efficient, competitive businesses, can that make it more politically popular? Not while government—national or corporate—is trying to appease CEOs at the expense of everyone else.