Southwest Airlines (LUV) revealed that its chief executive received a compensation package valued at less than $1 million in 2006, even as the carrier posted its 34th straight year of profits amongst other struggling airlines. The company's SEC filings showed CEO Gary Kelly receiving only $967,021 last year. This amount consisted of a $416,860 base pay, a $462,000 bonus, $620 in above-market deferred compensation, and $96,541 in other compensation including 410k contributions, medical insurance, and profit sharing. The three year contract under which Kelly is working allows for a below-average salary with a greater number of stock options. Moreover, the CEO's bonus was only 20 percent larger than in 2005, while the company's profits were up 38%. Southwest's employees were also compensated at levels designed to promote consistent profitability and stability of workers, according to the company's filings. Clearly this is a model for other airlines who have been experiencing problems with profitability and executive compensation.

Northwest Airlines Corp (NWACQ) flight attendants objected Monday to the company's failure to disclose how much its executives and directors would be paid when the company emerges from bankruptcy protection later this year. Northwest's latest filings detailed its reorganization plan but left out the part about executive compensation, which it plans to file at a later date. The flight attendants union argued in a bankruptcy court filing on Monday that it's impossible to evaluate the reoganization plan without knowing how much executives and irectors would be paid and how they would be selected. They argued that cuts imposed on them came with the understanding that management would sacrifice too - which remains to be seen...

Delta Air Lines announced a new pay package on Tuesday that would grant $480 million in employee pay and benefits while putting the CEOs pay and benefits on hold as the carrier plans to emerge from bankruptcy late next month. The new employee compensation plan calls for a cash lump sum payment of 8 percent of last year's salary, stock awards, incentive performance awards, profit sharing, pay raises of 4 percent, and 401k contributions. CEO Gerald Grinstein said, "We want to get them as fast as we can up to an industry average. [The executives'] basic salary part of their compensation is not going to go up until everyone else in the company is up to the industry average."

The plan has many employees satisfied while Grinstein commented that while the pay has been lousy for executives (comparitively), the rewards have been great with the greatest reward being the opportunity to work with employees to rebuild the company. And with the end of bankruptcy in sight, it could mean a nice payday for everyone involved!

Goldman Sachs Group Inc. (NYSE:GS) said Monday that it was named as a defendant in a shareholder lawsuit challenging the way the firm accounts for employee options. The plaintiffs contend that the company's proxy statement undervalues stock option awards while the company's senior management received excessive compensation. Specifically, the shareholders claim that the company issued excessive compensation (constituting corporate waste) due to the company not following the proper methodologies when calculating compensation. The lawsuit names the company's board of directors, executive officers, and members of its management as defendants seeking an injunction against the March 27th annual shareholders meeting and the voiding of any election of directors in the absence of an injunction. This is one of the first lawsuits of its kind since the new executive compensation rules took place, so it will be interesting to see if it goes anywhere or is simply dropped by the courts.

The new executive compensation disclosure rules are causing confusion among some investors who are finding executives with negative comensation amounts. Recently, Brookfield Homes Corp () CEO Ian Cockwell earned a negative $2.3 million according to a recent SEC filing by the company. In reality, Mr. Cockwell did not work for free in 2006, nor did he pay his employer with his personal funds. Rather, this negative number stems from a new method for measuring the value of deferred share units and stock options. The new rule states that companies must now disclose the value of these securities based on the same accounting standards used in financial statements; this values them at the end of the fiscal year instead of on the date they are granted. Moreover, companies are now only required to disclose the value of the portion of options that vesnted in any year rather than the value of the total amount granted.

Many investors say that the new disclosure is too complicated for the average investor to understand. However, many experts argue that it has always been this complicated, the complexity is just being realized now that the disclosures are a lot less vague. The key to accurately understanding these disclosures is to read through the entire CD&A section, not just the summary tables, as these can be highly misleading.

Citigroup's (NYSE:C) chairman and chief executive, Charles O. Price, took home $25.98 million in 2006 despite lackluster stock performance which fell short of many of its peers in 2006, according to the compensation committe of the companys' board. The executive's salary consisted of a $1 million base salary along with a $13.2 million cash bonus, an increase of about 13% over 2005. Many investors expressed concern that the compensation committee utilized too many vague and intangible metrics when computing pay while failing to include the most important - operating expense control. Meanwhile, Citigroup also reported that Gary Crittenden, its new CFO, would receive a pay package worth up to $10 million in 2007.

Track Citigroup's SEC Filings
Track Citigroup's Executive Compensation

Last week SEC Chairman Cox said during a speech that some explanations of executive compensation were excessively long and "overlawyered". Many lawyers, however, that have put in long hours writing these new required "compensation discussion and analysis" sections took offense. They counter that the SEC's stringent requirements make it essential for companies to put ALL compensation data out there, no matter how many pages. While this may complicate things for the average investor, lawyers see it as a necessity in order to avoid being sued by the SEC or the plaintiffs' bar is any minor detail is omitted. So, where is the middle ground? Well, that remains to be seen. For now, investors will just have to learn to forge through the occasional 30-60 page proxy containing executive compensation documentation in order to find what it is that they really want.

SEC Chairman Cox gave an address to the 2007 Corporate Counsel Institute yesterday in which is outlined future changes and commentary on current SEC regulations. In particular, he focused on changes to the executive compensation disclosure rules. One of the primary goals of the new regulations was to prevent the "boilerplate" disclosures that have previously been the norm, and instead replace them with genuinely useful information about executive compensation. Here's where he noticed the problems...

"We're seeing examples of overlawyering that are leading to 30- and 40-page long executive compensation sections in proxy statements. We’re seeing companies including columns in the summary compensation tables even when there's nothing to report in those columns. This kind of slavish adherence to boilerplate disclosure is what we're trying to stamp out," said SEC Chairman Cox. "So while we're giving people some grace in getting used to the new rules, the plain English part of executive compensation will be increasingly strictly enforced in the coming year."

He then summarized, "Before I leave the topic of executive compensation, let me offer a word about the new Compensation Discussion and Analysis section. This new opportunity for a company to detail the objectives of its compensation program is what good disclosure is all about — and it's where inside counsel can play a vital role. The narrative in the CD&A should provide a qualitative look at the company's executive compensation policies, and shed light on the quantitative tabular data. This is your chance to plainly tell the company's compensation story. I urge you to take the opportunity and make the most of it."