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Episode 682: When CEO Pay Exploded

Graph of CEO pay, with a huge jump in the 1990s.
Kevin Murphy
Graph of CEO pay, with a huge jump in the 1990s.

Note: This episode originally ran in 2016.

This year, 2018, publicly traded corporations had to start reporting the ratio between CEO pay and median workers' wages. Some of the numbers are eye-popping. The New York Times calculated that an employee at Walmart making the company's median salary would have to work for more than 1,000 years to make as much as Walmart's CEO earned in 2017.

How did this gap get so vast? There's a precise moment in the 1990s when CEO pay started going up--way up.

Today on the show, we go on a quest to find out why it happened. The story starts with a promise that Bill Clinton made on the campaign trail to tie CEO pay to company performance. We meet an economist who had a smart plan for how to do that--and then, we hear how he watched companies take that plan way too far. We meet the board members who thought they were getting something for nothing, and the compensation consultants who tried to show them the truth. And, we learn why Silicon Valley workers took to the streets to protest an accounting rule.

Music: "Love To Go" and "Second Line Stomp."

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Stacey Vanek Smith is the co-host of NPR's The Indicator from Planet Money. She's also a correspondent for Planet Money, where she covers business and economics. In this role, Smith has followed economic stories down the muddy back roads of Oklahoma to buy 100 barrels of oil; she's traveled to Pune, India, to track down the man who pitched the country's dramatic currency devaluation to the prime minister; and she's spoken with a North Korean woman who made a small fortune smuggling artificial sweetener in from China.
Jacob Goldstein is an NPR correspondent and co-host of the Planet Money podcast. He is the author of the book Money: The True Story of a Made-Up Thing.