The Association of U S West Retirees



It's getting trickier to out CEOs on their pay
Executives' angst over disclosure of their compensation has faded a bit over time.  But the lavish packages -- which sometimes have perks deeply buried -- still outrage investors and the public.
By Lou Gelfand
Minneapolis Star Tribune
Monday, January 2, 2006

The corporate chief of security was rattled.  The Minneapolis Tribune had just published a story disclosing the chairman's compensation for the previous year.  The story, the security guy claimed, had made the chairman vulnerable to a kidnapping.  I was the public relations guy, which meant it had to be all my fault.

"How can you let the paper publish the chairman's compensation?" he demanded.

There was more anxiety a few years later, when the Tribune allegedly overstated the chairman's income in a list of Minnesota's publicly held companies.  A vice president lodged an official protest with Dick Cunningham, then the reader representative.

It turned out that neither Cunningham nor I could navigate the complex documentation that the company submitted to the government.  But I found a numbers-cruncher at the company who could.  It turned out that the newspaper had understated the compensation.

The vice president wisely dropped his complaint.

But these days, it's not just a few activists who are putting the spotlight on executive compensation.  Corporate honchos have come to wearily accept the reality that their lavish compensation packages are the stuff of headlines.

And complaints about such paydays are being heard on Wall Street almost as often as they are on Main Street.

The Wall Street Journal reported this month that institutional investors "expressed dissatisfaction with current compensation standards, finding fault with severance pay and disclosure practices and time-vested stock awards."

The conclusions came from a survey by Watson Wyatt Worldwide, based on responses of 55 institutional investors representing $900 billion in assets.

The vast majority, 90 percent, said executives are dramatically overpaid;  85 percent agreed that current pay models have hurt corporate America's image.

On Dec. 22, the Journal reported that six Harvard University investment fund advisers received $58.5 million in fiscal 2005, "provoking renewed criticism of the Wall Street-style compensation."

The same day, the Journal's lead dealt with "gross-ups," a relatively new piece of compensation jargon identifying the corporate practice of covering an executive's taxes on a variety of perks, such as bonuses, country club memberships and luxury cars.

The story said a study by compensation-research firm Equilar Inc. showed that 52 percent of companies paid gross-ups to one or more of their top executives in 2004, up from 38 percent in 2000.

One Minnesota company, Metris Companies Inc. of Minnetonka, the article said, included unspecified "holiday gifts" in the gross-up perks of its executives.

The Journal said tax gross-ups "are often buried in impenetrable footnotes to obscure filings."

The year ended with more tales of corporate avarice.  Top executives of three Wall Street giants -- Goldman Sachs, Lehman Brothers and Morgan Stanley -- received, in that order, bonuses of $37 million in stock and options, $15 million in restricted stock, and $11.5 million in stock for six months of work.

Greed is good on Wall Street and may always be.

But 2005 also brought a healthy backlash.  The New York Times' Gretchen Morgenson reported Dec. 18 that Ethan Berman, founder and chief executive officer of RiskMetrics, which helps investors and corporations assess investment risk, asked his board to keep his 2006 salary the same as this year's.

Berman further requested that bonuses across the company be raised significantly above last year's -- except for his own -- and that he not receive stock options.

Berman undoubtedly will be considered a traitor to the Wall Street money culture.

In fact, the Times' Morgenson speculated that Berman's rather odd background -- he was a theater major and spent time in Paris writing plays earlier in his career -- could be responsible.

He may never write a Broadway play, but he has dramatized the Wall Street money culture -- and the power of one individual to move questions about business ethics to center stage.