Executive pay fell during the 1940s, marking the last notable decrease in the past 70 years. We study this decline using a new panel dataset on the remuneration of top executives in 246 firms. Government regulation-including explicit salary restrictions and taxation-had, at best, a modest effect on executive pay. By contrast, a decline in the returns to firm size and an increase in the power of labor unions contributed greatly to the reduction in executive compensation relative to other

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... earnings from 1940 to 1946. The continued decrease in relative executive pay remains largely unexplained.