Home Depot (NYSE:HD) shareholders suffered another setback today after their request to freeze Robert Nadelli's $210 million severance package was denied by a Georgia state judge. Moreover, since the court case delayed payment of compensation, the court also ordered that the payment process be sped up. The General Employees' Retirement System for Pontiac, Mich. first sought the injunction in early January after widespread anger over the ex-CEOs generous retirement package.

Meanwhile, Home Depot said that it has tightened its regulations by adding provisions enabling the company to recoup compensation paid to executives that commit fraud. The company also said that it has increased the number of directors on the compensation committee in order to increase scrutiny over executive pay. While many shareholders remain disgruntled over the situation, the company argued that it has learned from its mistakes and instituted measures to prevent future abuse. You can check out the compensation amounts of other Home Depot executives by visiting ExecutiveDisclosure.com.

The Senate approved measures last week aimed at making it more difficult for executives to protect their compensation from creditors in the event of a bankruptcy. These measures came in response to Enron, Worldcom, and other scandals in which executives made away with millions while shareholders lost their entire investment. The new regulations put a $1 million limit on what many highly paid executives can place into a tax-free deferred compensation plan. The new provision, which was passed unanimously with a larger bundle of legislation, will also greatly increase taxes for a number of highly paid executives by millions of dollars over the next 10 years. The measure is part of a dozen other provisions aimed at limiting corporate and executive tax loopholes, after widespread abuses in the corporate world.

A new study on Director influences on CEO compensation (full report) shed additional light on an issue that has been receiving a lot of press.

Here are a few exerpts summarizing their findings:

This paper explores how networks of directors affect CEO compensation. We map the entire network of all board members of S&P 1,500 firms between 1996-2004, and generate network measures that capture several dimensions of these connections. We present strong empirical evidence that firms that have more connected board members, and whose board members are connected to better connected firms award a higher compensation to their CEOs. Controlling for firm size, investment opportunities, industry, and performance, a CEO of a firm which is in the top quintile of connected firms receives a 10% higher salary and a 13% higher total compensation than a CEO of a firm which is in the bottom quintile of connected firms. These results are robust to alternative explanations such as interlocked boards, busy boards, and entrenched boards; they are also robust to the independence of the board, geographic location of the firm, different governance measures, and potentially unobserved CEO or firm characteristics. These results highlight the important role that board networks play in the decision to compensate a CEO. Outlandish goodies are showered upon CEOs simply because of a corporate version of the argument we all used when children: "But, Mom, all the other kids have one."

These results highlight the importance of understanding the intricate ways in which a board of directors makes decisions. We present evidence that the decision regarding CEO compensation is highly affected by a unique characteristic of the board - how central it is in the overall director network.

There are several theories as to why this difference exists. Some argue that this study is evidence of corporate back-scratching - or friends-of-friends networks, while others insist that it highlights a greater move towards self-serving practices. However Dale Oesterle, a law professor at Ohio State University, doesn't think it's that complicated. He believes that it is simply the fact that a board member with a reputation for supporting CEOs gets other jobs; an outside directors that is friendly to CEOs on one board gets selected by other CEOs for other board positions. Regardless, the study does further illustrate the many issues that must be addressed to fix the many problems associated with executive compensation in corporate America.

Caremark Rx Inc.'s (NYSE:CMX) deal with CVS Corp. (NYSE:CVS) unfairly favors company insiders, according to a shareholder lawsuit brought to court by shareholders attempting to block the merger. Shareholders were also infuriated earlier this month when the company's board voted unanimously to block a higher, rival offer from pharmacy benefit manager Express Scripts Inc. (NDAQ:ESRX).

What's so unusual about this deal? Well, first of all, the Caremark-CVS deal has a whopping $675 million breakup fee - much larger than that of many large PE buyouts that took place recently. Secondly, Caremark executives and directors would also receive lucrative director positions at the combined company and could use the company's sale to free themselves from possible penalties and fines from an investigation by the Securities and Exchange Commission into potential backdating of stock options. In fact, CEO Edwin 'Mac' Crawford Thirdly stands to gain $48 million in stock, severance payments and consulting fees as part of the CVS deal. Finally, while the CVS offer is for stock in the company, and the Express Scripts offer was for stock plus a cash premium to shareholders. This is not to mention that the entire transaction took place near the stock's 52-week low, which is highly suspect.

Clearly there are plenty of reasons for concern. Lawyer Stuant Grant said it best: "Our main gripe is this was a sweetheart deal that gave the insiders a lot more than the outsiders". Whether or not this can be successfully resolved depends largely on the sentiment of larger institutional shareholders.

The Walt Disney Company's (NYSE:DIS) CEO Bob Iger revealed a $24.9 million pay package in a recent 14A proxy filing with the SEC. The compensation package included $2 million in salary, a $15 million cash bonus, and a $4.3 million payout from the vesting of performance options. Moreover, Iger also received $666,000 expense reimbursements for auto benefits ($14,400), personal air travel ($67,879), and security ($578,656). And this comes in addition to another $2.92 million in Disney stock options granted during the company's fiscal year. While this package pales in comparison to recent $100 million compensation packages, it still represents significant reimbursed expenses at the cost of shareholders. This is also a significant raise over his previous salary as COO, where he received $9.24 million in salary and cash bonus, $500,000 in restricted stock, 274,241 stock options, and other compensation of $1.02 million. But with Disney stock reaching new highs, he could be worth the price...

Metropolitan Capital urged Cyberonics (NDAQ:CYBX) shareholders to send a message to the company's board today in a press release intended to inform shareholders of its own nominations to the company's board of directors. In the press release, the company outlined the problems facing the company, and why change is necessary in order to unlock shareholder value in the long-term. These problems ranged from lack of board supervision to backdating scandals to poor corporate governance. Here's an overview of the fund's concerns:

"Lack of Board Supervision - The current members of the Board failed to adequately supervise and hold management accountable, and during a period of significant share price underperformance, on multiple occasions, approved compensation and severance packages for the former CEO that we consider to be highly excessive and inappropriate in light of the Company's poor share price performance and the circumstances surrounding his departure.

In contrast to the losses incurred by Cyberonics shareholders over the last few years the former CEO banked tens of millions of dollars in compensation, restricted stock awards and sales proceeds from options grants all thanks to the largesse of the incumbent Board. Even after his forced resignation, under a cloud of suspicion, and in the wake of the options back- dating scandal that has been so costly to Cyberonics shareholders, the present Board authorized a severance package for the former CEO that we value to be worth at least $5 million. Ask yourselves, "how did this severance package serve the shareholder's interests?"

Options Back-dating Scandal - Over an extended period the Company appears to have engaged in a process of options back-dating and spring-loading. The fallout from this malfeasance continues to be felt by the Company and its shareholders. In late November, when the Audit Committee announced the completion of their review of the Company's stock option practices, the Company estimated a charge of $10 million would be taken. The Company trumpeted its ability to "move forward from this point and execute on its business plan." By last week, the charge had increased to over $18 million-but unfortunately this time there was no boastful press release-that information had to be dug out of the Company's 10K, which was finally filed, albeit nearly six months late. As shareholders we must ask ourselves, "is this lack of transparency the best way for the Company to move forward and begin to rebuild its credibility?"

Lack of Good Corporate Governance - The incumbent members of the Board have seemingly been inured to issues of deficient corporate governance and have only reluctantly begun to address those issues under the threat of court action and in the face of our proxy fight.

Shortly thereafter, the Board approved a new five year contract for the former CEO-despite his having nearly three years remaining on his existing contract! The NEW contract increased his base compensation by more than 50% and included a substantial grant of restricted stock. Little more than a year later, the same Board found itself approving the aforementioned $5 million severance package for that former CEO.

Failure to Separate the Offices of CEO and Board Chair- It took nearly six months from the time we first raised the need to separate the posts of CEO and Board Chair with Company representatives for the Company to implement this basic and widely accepted policy of sound corporate governance (and this was only done after the former CEO, who also held the title of Chairman of the Board resigned under the weight of the options scandal).

Failure to Timely Hold Annual Meeting- After months of our petitioning them to do so, the Board only agreed to hold its 2006 annual meeting of shareholders on Feb 1, 2007, in order to settle the suit we filed in the Delaware Chancery Court to compel the Company to set a meeting date."

This information is not only important for Cyberonics shareholders to consider, but also shareholders in other companies. Many of the issues listed are precursors to problems - shareholders should be on the lookout for these warning signs before its too late.

Home Depot (NYSE:HD) investors are asking a Georgia judge to block the retailers from giving a $210 million severance package to former CEO Robert Nardelli. The shareholder group, led by Pontiac (Michigan's employee retirement fund), have filed a temporary restraining order in Superior Court of Fulton County. And this isn't the first time that Pontiac and HD have met in court - back in September, the fund charged that HD executives and board members had backdated options. While the company admitted that this was true, they maintained that it happened before Nardelli's tenure. We will not know the outcome of this case for several weeks; however, it is becoming increasingly apparent that executive compensation is likely to remain a hot-button issue throughout 2007.

Highly paid executives have recently found themselves under increasing pressure from shareholder activism groups, and new SEC regulations only make their situation worse. While some of these executive pay concerns are justified, there are many instances in which high pay is justified. For example, successful CEOs that specialize in turn-around situations typically command a higher premium because of the increased risk. However, many members of the media and shareholder activism groups fail to differenciate these CEOs. This is causing many highly paid CEOs to migrate to private equity controlled companies, according to a report from the New York Times.

Private equity groups can offer these CEOs many benefits that are impossible to obtain at most public companies, but are often much more active in their oversight. For example, many private equity groups prefer to give CEOs a significant stake in the company, which can help them generate real wealth if the company performs well. However, if the company doesn't perform as expected, it is a lot easier for the PE group to fire the executive than it would be to oust them from a public company. Moreover, the executive may not see a lot of monetary gain if the company does not perform well. However, many highly paid executives in the world of public companies have excellent management ability, and therefore are more apt to take on such opportunities. The downside, of course, is that the move may draw an increasing amount of talent from public companies to private companies.