7. SHIFTING GEARS IN THE CORNER OFFICE: DEREGULATION AND THE EARNINGS OF TRUCKING EXECUTIVES

We study the earnings of executives of for-hire trucking companies from 1977 to 1986. Following deregulation of the U.S. trucking industry in 1979-1980, the real earnings of trucking firm executives (corporate officers) fell for a year or two, but then stabilized and, in the mid-1980s, recovered. Profit rates also fell immediately after deregulation, and then leveled off. The earnings of employee drivers, on the other hand, went into steady decline from 1979 to past the end of the period studied here. To analyze these trends we use a version of the Motor Carrier Financial and Operating Statistics, collected by the Interstate Commerce Commission on all medium-sized and large trucking firms for the years 1977-1986. Our version is unique in breaking out annual employee earnings by employee category for this time period. We document the change in the relative earnings of drivers and executives within the same trucking firms over time. We test the predictions of principal-agent theory and the political constraint model concerning the effect of deregulation on the level and performance sensitivity of executive pay, and find evidence favoring political constraint over principal-agent. We also explore the effects of union presence and union busting on the pay of executives, and find that officers in unionized firms get paid more on average, but that officers' pay increases when a unionized firm goes non-union.