Daily Archives: February 16, 2007

CEO Pay 4: The Corporatocracy Undermines Openness

Last December, the SEC changed the accounting rules around the reporting of top corporate executive pay packages to require, it said, “more openness”. SEC Chair Christopher Cox bragged that for the first time investors would get a clear picture of just how much $$$ was being paid out in salaries, bonuses, and other benefits. Critics, however, claimed there was a loophole that would allow one of the biggest chunks of an executive’s total pay to be hidden or glossed over: stock options. Cox pooh-poohed them and put the rule into effect.

Well, once again, the critics were right.

Due to an accounting loophole for stock options and an eleventh-hour rule change made by securities regulators just before Christmas, some of the biggest names in technology, health care and financial services will be able to cloud what their top executives make.

The anomaly is being discovered by compensation consultants who have been hired by firms to draft these filings. In some cases, it is lowering the compensation figures reported by firms, they said. In others, executives who should be named in the filings as the five highest-paid officers in their companies are being replaced with employees making less.

I like that word “discovered”, as if nobody noticed it before the accountants actually had to deal with it. “Anomaly” is another good word. It makes it sound like it’s an unintended consequence, something no one saw coming, and some kind of weird, strange, unexplainable phenomenon, like a tornado or UFOs. Continue reading