The head of Alcan Inc. spoke out against critics today who attacked compensation packages distributed to executives for accepting a foreign takeover bid. The firm agreed last month to a $38 billion takeover bid from London mining company Rio Tinto, and if the deal goes through CEO Dick Evans will receive more than $50 million in compensation including $37 million in stock options. The executive argued that stock-based compensation aligns executives with shareholders and that criticism of the deal is undue.

"It is totally within the norm. You have to consider that less than a year ago, the market capitalization of Alcan was less than $15-billion, today it is about $35-billion. The purpose of stock-based compensation is, in fact, to align the interests of management and shareholders," Mr. Evans said on a conference call to discuss Alcan's second-quarter financial results. He said it was "naive" to think that corporate managers and boards of directors don't have a duty to act in the best interest of shareholders, including considering takeover offers. And in the end, he is right to a certain degree - stock based compensation packages do align interests but only if they are set at the same level as common shareholders. That is, if he would be holding stock in either situation and honestly feels that a buyout is the best option.

American Airlines continues to upset investors with its executive compensation plans after it increased the plan yet again last week. The new provisions would enable executives to earn an additional $13 million in stock in 2010 during a time when employees have faced 20 to 30 percent pay cuts. The airline's turnaround wasn't all that bad for employees as it cut less jobs than any other major airline that underwent bankruptcy; however, executives and top managers received rewards during this same period thanks to AMR's soaring stock price and stock-bonus plans. Last year, $95 million in stock was dished out to executives while another $160 million was shelled out during April of this year! Clearly there is a disconnect here between executives and employees that needs to be solved - especially in a major company shortly after a bankruptcy.

Nissan Motors Co. CEO Carlos Ghosn made sure executives were feeling executives' pain this year after the company underperformed both Honda Motors and Toyota Motors. The chief executive eliminated bonuses for top executives, including himself, last year after profits dropped substantially. The move pleased many shareholders who are glad to finally see some accountability in the boardroom.

"It was a good move by Ghosn to show shareholders and employees that he will hold top management responsible for missing sales and profit targets," said Yoshihiro Okumura, who helps oversee Chiba-gin Asset Management Co. in Tokyo. "Clearly, Ghosn had too much on his plate both trying to improve Nissan and Renault's performance."

ConAgra Foods agreed to pay $45 million in fines today to settle SEC fraud charges and improper accounting practices. The SEC discovered that the company had substantially distorted its financial statements between 1999 and 2000 while making numerous tax errors from 2002 to 2005. Interestingly, had the accounting been done properly, the company would have missed Wall Street estimates for 11 fiscal quarters between 1999 and 2002.

"The facts here are particularly troubling because of the number of different improprieties engaged in by ConAgra, the length of time over which they occurred, and the fact that senior management was involved in the misconduct," SEC Enforcement Director Linda Thomsen said in a statement.

The $45 million in fines will be put in a fund that will be dispursed to affected shareholders.

New regulations on executive compensation are exposing just how much many executives are receiving in retirement benefits - a major component of their pay packages. Just how large are these retirement benefits? Well, former Gannett chairman Douglas McCorkindale who retired last year with a $25 million retirement package in addition to his $21.1 million in deferred compensation. Interestingly, all but $1.7 million of this retirement income was derived from a special executive compensation plan that doesn't apply to normal employees.

The trend is only on the increase too. Executives of the Fortune 1000 companies offering supplemental executive retirement plans stands at about 69% of companies. Meanwhile, non-qualified deferred compensation plans are distributed amongst about 90% of Fortune 1000 companies. These numbers compare to just 21% of private sector employees covered by defined-benefit retirement plans and 42% covered by 401(k) plans. Clearly, there is a disconnect between executives and employees when it comes to retirement plans...

Regulators have been waiting years to revamp the infamous Section 162(m) of the IRS code - a portion originally designed to rein in executive compensation that inadvertently led to even greater pay. Recently the IRS may have given them that chance by ruling that compensation for CFOs is no longer covered under the section, which essentially allows them to decide on any pay they wish without worrying about tax consequences.

Why is this a good thing? Well, the move will likely force lawmakers in Washington to take a second look at the issue and finally revamp the ancient rule - just as many candidates are focusing on excess executive compensation. Treating a CFO differently is simply a ruling that cannot stand; and while lawmakers could simply make a quick technical change, it is likely that at least two key lawmakers will want much larger changes to the rule. Barney Frank and Charles Grassley are two lawmakers that have been waiting for an opportunity like this for some time. Whether or not they take action remains to be seen; however, we could soon see new tax law that may finally effectively rein in excessive executive compensation.

Capital One CEO, Richard Fairbank, is one executive that hasn't taken a salary but maintained a nice paycheck in the form of stock options. The executive has booked around $29.3 million in compensation by selling approximately 470,000 stock options from the beginning of May through last Friday. The options carried strike prices set at $16.75 which gives him great incentive to increase the company's stock price while securing a salary - as the current share price stands at just over $75/share. However, many investors remained concerned, especially given the company's recent 24% drop in quarterly earnings and struggling subprime mortgages division. Moreover, the company announced last week that it would cut around 2,000 jobs in order to reduce expenses and boost its earnings. Management contends that many of these problems could be short-term and were somewhat unavoidable (given the sudden collapse of the subprime market).

A new study conducted by the Institute for Operations Research and the Management Sciences (INFORMS) found that employee stock option plans (ESOPs) offered to executives as part of their compensation package could significantly increase the risk of fraud in the form of rigged share prices. The study's authors said, "Our results demonstrate two factors substantially increase the likelihood of financial misrepresentation: extremely low performance relative to average performance in the firm's industry, and high percentages of CEO compensation in stock options." Interestingly, the authors found that bonuses did not have the adverse affect of stock options.

These days there is great incentive for performance-based compensation as it is supposed to motivate executives to boost performance. Many of the tax laws and new disclosure laws clearly favor these types of performance-based compensation. However, it appears as if stock options may now be a double-edged sword - the SEC must identify new ways to discourage aggressive, unethical or illegal behaviors.