Since shareholders are a relatively privileged group themselves (if not as privileged as CEOs), they could potentially wield power in this situation policymakers should try to figure out how to enlist shareholders in the fight to restrain excess managerial pay.

Importantly, the most direct damage done by excess CEO pay is to shareholders. Because pay for top managers-CEOs and others-is not driven by their contributions to economic growth, this pay can be reduced and others’ incomes boosted if we can figure out a way to restrain CEOs’ market power. High CEO pay spills over into the rest of the economy and helps pull up pay for privileged managers in the corporate and even nonprofit spheres. Why it matters: CEO pay is not just a symbolic issue. While corporate boards technically report to shareholders, shareholders are not particularly well positioned to put pressure on directors to restrain CEO pay.

Increasing CEO pay is not actually linked to an increase in the value of CEOs’ work instead, it is more likely to reflect CEOs’ close ties with the corporate board members who set their pay. What this report finds: Since the 1970s, rapidly accelerating CEO pay has exacerbated inequality in the United States: High CEO pay generates pay increases for other high-level managers, while pay at the middle and bottom of the wage distribution continues to be depressed.

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