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
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 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
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
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
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