When CEO pay exploded (update)

This Planet Money episode investigates the dramatic increase in CEO pay in the mid-1990s and its contributing factors. The episode explores how a change in the tax code, intended to incentivize performance-based pay through stock options, inadvertently led to an explosion in CEO compensation. The key factors were the perception that stock options were "free" due to accounting rules and the reluctance of boards to reduce base pay. Although reforms and market corrections briefly lowered CEO pay, it has since rebounded, with CEO earnings growing faster than average employee wages. A more recent requirement for companies to report the ratio of CEO pay to median employee pay highlights the widening gap.