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Recent Developments in Executive Compensation

By Dennis P. R. Codon and David L. Lynch
March 02, 2004

Executive compensation has risen from approximately 56 times the average employee's salary in 1989 to approximately 200 times the average employee's salary in 2002. During the stock market's halcyon days, concerns over this steep increase seemed to be limited to certain activist shareholders, public interest organizations, and Warren Buffet.

Although executive compensation has been the subject of evolving reform for several years, the bright spotlight of public attention is now focused on this issue, due in part to the bursting of the stock market bubble, the collapse of Enron, and a number of other highly publicized corporate scandals. The image of executives enjoying excessive compensation packages as revenues and earnings decline, and stock values of the companies they manage plummet, is a dangerously common stereotype.

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