But some economists have offered an alternative, difficult-to-quantify explanation: that the social norms that once reined in executive pay have disappeared.
This new attitude, according to this view, was reflected in epigrammatic form by the 1987 movie “Wall Street,” which made famous the phrase “greed, for lack of a better word, is good.” Americans were growing more comfortable with some extremes in pay. Payoffs for the stars on Wall Street, in the movies and in pro sports were rising.
But back in the ’70s, something was holding executive salaries back.
Harold Geneen, the president of ITT, then one of the nation’s largest companies, told Forbes in 1975 that while he might be worth six times as much to the company as he was making, he hadn’t sought a raise.
“No one moved up there, and I didn’t dare do it alone,” he explained.
Over at Dean Foods, Kenneth Douglas was likewise resistant to making more. Most years, board members at Dean Foods wanted to give Douglas a raise. But more than once, Douglas, a former FBI agent who literally married the girl next door, refused.
“He would object to the pay we gave him sometimes — not because he thought it was too little; he thought it was too much,” said Alexander J. Vogl, a members of the Dean Foods board at the time and the chair of its compensation committee. “He was afraid it would be bad for morale, him getting a big bump like that.”
“He believed the reward went to the shareholders, not to any one man,” said John P. Frazee, another former board member. “Today we get cults of personality around the CEO, but then there was not a cult of personality.”
Outside one of the Dean Foods dairies recently, the workers at the plant for the most part only rolled their eyes when asked about Engles’s salary. But they spoke admiringly of Douglas.
“People back then thought enough was enough,” said Ron Smith, 63, who maintains the machines at the plant.
Some were reluctant to criticize Engles to a reporter. Others defended him.
“You’re king of the hill, and you get paid for that,” said Ray Kavanaugh, 61, who operates a filler at the dairy. “He’s worth it if he keep the company making money.”
The employees said they only occasionally dwell on Engles’s riches, anyway. Their primary focus is on making ends meet, they said.
Joe Bopp, 55, said he has a second job taking care of a cemetery during the summer months, mowing the grass and digging graves.
“Twenty-three dollars an hour sounds like a lot of money,” he said. “But when you pay $4 a gallon for gas and $3.29 for a gallon of milk, it goes away real fast.”
This is the first in an occasional series.