Are the rich really different? explains some of the reasons why CEO pay is so much higher than it used to be:
But in fact, the tax rates of the 1950′s didn’t necessarily reduce CEO consumption; it just reduced their reported taxable income. The high income tax rates in the 1950′s were paired with a corporate tax system that allowed companies much more generous deductions for things like business lunches, business-travel-with-spouse, and so forth. Right now you pay Rick Wagoner a squillion dollars, and he entertains important people on his own dime; in 1955, you paid him less, but he expensed all his entertaining to the company. Descriptions of 1960′s expense account procedures for even entry-level management are enough to make this journalist rather faint with envy.