In a followup to their 2008 paper on CEO compensation, Xavier Gabaix, Augustin Landier, and Julien Sauvagnat just released a paper looking at how CEO compensation decreased and rebounded as a result of the crisis.
The result isn’t pretty, at least for top executives.
From the abstract:
During the crisis (2007 – 2009), average total firm value decreased by 17%, and CEO pay decreased by 28%. During 2009-2011, we observe a rebound of firm value by 19% and of CEO pay increased by 22%.
This is a solid recovery, but still means that CEO and other executive compensation is down after the crisis.
Firm value has by and large rebounded by 2011, as a 17% drop and a 19% rebound comes to a net decrease of only 1.2%.
However, a 28% decrease followed by a 22% increase means that by 2011 CEO compensation was still down 13% from pre-2007 levels.
Take a look at this chart of executive, non-CEO compensation from 1992 to 2011.
While firm value exceeds pre-recession levels for top 500 firms, equity value is still quite lower than 2008 levels.
Even more, both CEO compensation and non-CEO executive compensation is still below pre-recession levels.
Still, looking on a longer view, it’s pretty clear that the hit chief executives took in the recession is nothing compared to the explosion in compensation levels they’ve enjoyed since the eighties.
Even as firm value has risen steadily, CEO compensation hit huge highs in the 2000s that even a significant hit can’t really wipe out:
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