The rise of dot-coms in the late 1990s pushed CEO compensation up so high that just before that industry’s bubble burst in 2000 the average CEO-to-worker pay ratio in the United States, across all industries,was 400 to 1. For context, consider that in 1965 the ratio was just 18 to 1. Then, in 2001, the Enron and WorldCom accounting and governance scandals came to light. The increasingly popular practice of offering stock options as compensation to upper management created perverse incentives for executives to doctor financial reports in hopes of inflating stock prices. Stock options also played a key role in the compensation packages of dot-com executives and may have influenced valuations of those firms.
via Has “Say on Pay” Worked? | Columbia Business School Ideas at Work.
