"SUNLIGHT," remarked the Supreme Court justice Louis D. Brandeis, "is said to be the best of disinfectants." One problem with too much sunlight, however, can be the blinding glare.
That, in many ways, captures what compensation experts say are positive and negative developments in the newest round of executive pay disclosures. In response to a barrage of criticism that regulators have not kept up with the complexities of swelling pay packages, the Securities and Exchange Commission now requires corporate America to disclose details of executive compensation more fully. As this year's proxies pour in, they are packed with fresh information aimed at making pay more transparent.
.... But while all the new disclosure rules have resulted in far more information, analysts say they still do not necessarily offer greater insight.
"It's like reading through Tolstoy's 'War and Peace,' " said Lynn E. Turner, a former S.E.C. chief accountant and now a managing director of research at Glass, Lewis & Company, a proxy research firm in San Francisco. "What is missing is a clear, succinct story about how the compensation committee came to the amount they were going to pay."
Many shareholders say the new proxies require more work, not less, to decipher. Pay consultants say some of the new data is so dizzying that they are not sure how to sift through it; some charts even require another set of charts to interpret them. And a new section in proxies, meant to explain clearly how executives are compensated, is overrun with mind-numbing corporate-speak and legalese.
Even the simplest of questions becomes mired in the disclosure swamp. For example, just how big was the average chief executive's pay increase in 2006? At most companies, it seems, fuller disclosure has made answering that question a tricky endeavor.
This year, for the first time, corporate filings disclose a single, handy executive compensation figure. But how that figure was calculated differs markedly from how investors arrived at similar ones in previous years — making apples-to-apples comparisons difficult. Despite that problem, it is still clear that bosses enjoyed healthy raises in 2006. The typical chief executive at a big company was paid about $10.1 million, up 9.8 percent from 2005, according to a survey by Equilar Inc., an executive compensation research firm based in San Mateo, Calif. Equilar's analysis is based on the compensation awarded to chief executives at 150 of the biggest companies, as ranked by revenue. The analysis includes only companies that had filed proxies by the end of March using the new disclosure rules.
Of course, that payday is freighted with lavish exit packages and deferred compensation plans, forms of pay that have never been fully disclosed until this year. Nearly one-third of the executives whose pay was examined for this article can count on pension benefits worth more than $10 million down the road, according to Equilar.
Tighter reporting requirements for perquisites reveal even more extra benefits for being the boss — including "personal health coaching" for Motorola's top executives; free beer, haircuts and club memberships at Anheuser-Busch; and, at more than 70 percent of the companies examined, personal use of the corporate jet. Facing greater scrutiny, at least a dozen boards, including those at
Lockheed Martin and Washington Mutual , eliminated all or some executive perks last year. In many cases, boards then replaced those benefits with cash.
The shape of pay packages is changing, too. With new rules highlighting performance measures, more companies are awarding equity linked to meeting certain goals rather than bestowing stock options or restricted stock, which often pays executives for simply having a pulse. About 40 percent of the typical chief executive's pay package this year was linked to hitting specific corporate targets.
Even so, some things remain essentially the same. Chief executives in the financial services, oil and health care industries generally landed outsized paydays in 2006, just as they have for years. Ray R. Irani, Occidental Petroleum's chief executive, had a $52.1 million payday, the largest of anyone on the list of 150 companies that filed under the new rules. But even that amount was overshadowed by what Lloyd C. Blankfein, Goldman Sachs's chief executive, was paid under the old disclosure system. His $54.3 million pay package made him Wall Street's highest-paid boss, though he held the top job for less than half the year. Not far behind Mr. Blankfein were the heads of Wall Street's other big investment banks, where the typical pay package crossed the $40 million mark.
(Of course, those sums are probably a pittance compared with some paydays in the buyout and hedge fund worlds, where compensation remains a private matter.)
Home builders also continued to reap big rewards, even as the American housing market soured. The typical chief executive in the home-building business received total compensation of $22.4 million in 2006, up 2.7 percent from the previous year. Shareholders in those home-building companies, meanwhile, saw their returns decline by 1.3 percent, on average.
Disclosures also show for the first time just how big several executives' paydays will be even when they stop working. On top of a 2006 pay package worth $31.5 million, Edward E. Whitacre Jr., 65, the chief executive of AT&T , can look forward to about $73.8 million in deferred pay and the largest pension on the list, at $84.7 million in retirement benefits. Mr. Irani of Occidental Petroleum has more money socked away in his deferred compensation account than any other executive Equilar examined. In fact, Mr. Irani's deferred pay of $124 million yielded at least $679,396 in interest last year — interest that amounted to more than 14 times the average salary of an oil industry worker.
The new rules "may have increased the visibility of pay packages," said Mark M. Reilly, a partner at 3C, Compensation Consulting Consortium, in Chicago. "But there are still a lot of problems out there."
OVER the last year, outsized pay has been at the core of some of the biggest corporate controversies and national debates. Even President Bush has weighed in on the matter. Ordinary American workers are also complaining about the huge salaries and golden goodbyes handed to their chief executives at a time when their own wages and benefits are being cut.
Pay-for-failure has also fueled the compensation debate, highlighted by the nearly $200 million exit package that Henry A. McKinnell secured at Pfizer and the $210 million parachute tied to Robert L. Nardelli's back at Home Depot. Both left after investor uproar over their companies' poor performance.