Control of Corporate Salaries

September 10, 1935

Report Outline
Depression Growth of Moves to Curb Huge Salaries
Disclosures of Large Salary and Bonus Payments
Government Efforts to Force Down Large Salaries
Attitude of Courts on Excessive Salaries and Fees
Special Focus

Depression Growth of Moves to Curb Huge Salaries

Before The Depression and before the advent of the Roosevelt administration disclosures respecting the annual compensation of executives of large corporations were rarely made. The amount of such emoluments was usually shielded even from stockholders, and it was only as the result of an occasional court litigation or official investigation that the public obtained accurate information as to the pay of corporate officers, and then only in a particular corporation or a particular line of activity. In the prosperous days of the post-war decade, moreover, very large salaries were generally regarded as marks of success—to be commended rather than criticized.

The hard times that followed the stock-market collapse of 1929 tended to cause a change of public sentiment in this respect. When details as to the huge sums paid in one form or another to certain business executives and bank officials were revealed, agitation grew in Congress and elsewhere to devise means for curbing corporate salaries. This movement conformed with the philosophy of the Roosevelt administration and received its full support. While few measures of direct control have been placed in effect, an indirect influence toward limitation of large corporate compensation has been set in motion through the publicity given by the Securities and Exchange Commission to salary data filed in connection with registration of security issues. Through these reports and the findings of an investigation carried out by the Federal Trade Commission, in response to a Senate resolution sponsored by Senator Costigan (D., Colo.), a comprehensive body of information has become available showing the salaries paid to the officers of hundreds of corporations during the seven-year period 1928–1934.

Although not specifically related to the movement for curtailment of big corporate salaries, the higher surtax rates to be imposed on large incomes by the President's taxation-of-wealth revenue act will have the effect of swallowing up in taxes substantial portions of any great salaries or bonuses paid to corporation executives. Furthermore, with increased taxes on the undivided profits of personal holding companies and with subjection of a part of intercorporate dividends to taxation, the financial devices through which various captains of industry have obtained large personal profits will be more difficult of manipulation. More stringent application of income-tax regulations restricting to reasonable amounts the deductions on account of salary payments which corporations may make in calculating net income for tax purposes may also tend to check distribution of extravagant bonuses.

ISSUE TRACKER for Related Reports
Corporate Salaries
Mar. 09, 2007  Curbing CEO Pay
Jul. 11, 1997  Executive Pay
May 29, 1992  Fairness in Salaries
Sep. 10, 1935  Control of Corporate Salaries
Economic Crises