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Published: Thursday, 4/12/2007

Snow job on executive pay

NEW rules put in place by the federal Securities and Exchange Commission to more fully illuminate executive compensation at publicly held companies have had the opposite effect.

More information is available now, but it's presented in such a blizzard of bewildering facts, figures, and footnotes that the true extent of legal larceny of corporate resources via the executive paycheck remains difficult to decipher.

One reason: The SEC promised more transparency on executive pay, then delivered a little-noticed Friday-before-Christmas gift in the form of a gigantic loophole that allows companies to obfuscate the value of stock options and other equity awards.

Still, the latest proxy statements filed by some of this country's top business concerns reveal some hair-raising details of the outlandishly generous pay packages afforded CEOs these days.

These packages range from golden greetings - huge sums executives get simply to sign on - to the familiar golden parachutes, paid when they finally bail out. Another egregious trend is big bucks in severance deals that are guaranteed even if the company's financial position plunges or if the top guy is pushed out for bad behavior.

Indeed, the New York Times reported that corporate shareholders were left "holding the bag" to the tune at least $1 billion last year under these so-called "pay for failure" arrangements.

David J. Edmondson, who resigned at Radio Shack after just nine months, reportedly for lying on his resume, still got $1.2 million in severance.

Poor performance didn't hurt Robert L. Nardelli, late of Home Depot, who was fired in January with a $210 million deal, nor Henry A. McKinnell, of Pfizer, who made off with $198.8 million, even though the pharmaceutical giant lost $137 billion in market value during his six years on the job.

Pfizer, not so incidentally, used 17,000 words to detail its compensation formula, the opposite of the succinct explanation of executive perks the SEC promised.

Nonetheless, corporate profits nationally were up a healthy 16 percent in 2006, and CEOs were rewarded generously. One study showed that total executive pay at 350 companies rose 8.5 percent.

The king of the money hill looks to be Ray R. Irani, of Occidental Petroleum, who received $52.1 million. As the Times noted, the interest alone on another $124 million in deferred compensation granted Mr. Irani yielded $679,396 - an amount equal to 14 times the average pay of an oil industry worker.

On top of that, Mr. Irani cashed out $270 million more in stock option profits - for total compensation approaching an unfathomable half a billion dollars.

While companies cling to the claim that they are forced by marketplace competition to pay huge sums to get qualified executives, it is a justification that rings hollow for the vast majority of Americans.

Stratospheric pay levels for executives naturally raise the hackles of ordinary workers, whose salaries fall far short of the "glamour guys" at the top.

Investors, too, have a legitimate right to gripe about the unnecessary drain on corporate resources.

After all, they, not the CEOs, own the companies.



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