The chief executive of BJ Services (NYSE:BJS), J.W. Stewart, received compensation amounting to $8.2 million for fiscal 2007, according to a proxy statement with the SEC. The compensation consisted of approximately $1.1 million in base salary along with stock and option awards amounting to $6.6 million on the day they were awarded. The executive also received $540,005 in other compensation including $16,965 for financial counseling, $9,074 for club memberships, $20,000 in charitable contributions, and $363,591 in tax gross-ups for stock awards.

Recent surveys have shown that the double-digit raises received by many chief executives in the United States ahead of the credit and subprime crises could spur a whole new set of proxy battles. Research reports by The Corporate Library this week showed total annual compensation for chief executives rising by nearly 13 percent with the highest – 23.6 percent – going to S&P 500 CEOs.

Meanwhile, many investors have been suffering quite substantially from massive write-downs in the asset-backed securities markets. This, coupled with a rise in oil prices, has caused many shareholders to demand that CEO salaries match share price trajectories. Many executives insist that their healthy returns in the past should justify their pay this year, but so-called “say on pay” proposals are still gaining traction in many large companies.

Individual investors can quickly evaluate executive compensation and compare it to stock performance with unique visual graphs via ExecutiveDisclosure.com.

New IRS rules and regulations will target companies that offer their executives deferred compensation plans and arrangements. Deferred compensation plans have traditionally enabled executives to defer compensation beyond what would be apportioned to a 401k plan. These are benefits that are not available to the rest of the workforce and therefore attracted some unwanted attention.

The new Section 409A regulations will address all plans, programs, and arrangements that defer compensation from one tax year to another. The new regulations restrict an executive’s ability to change the timing or structure of his or her deferred compensation plan. Payment trigger events are now limited to termination, death, disability, or a change of control transaction. The regulations are prohibit elective acceleration of payments, except under very limited circumstances.

Top executives with large pay packages may be worth the money, or at least that’s what a consulting firm found during a survey that was released today. Watson Wyatt Worldwide – a global consulting firm – found that total compensation for chief executives at the top 1,072 companies was a media $7.9 million. Interestingly, the survey also found that companies performing well averaged $10.5 million while those performing poorly averaged just $6 million. The survey is welcome news to executives who have faced harsh criticism from the media to the President.

“The evidence from this year’s study clearly indicates that most boards of directors are linking executive pay to financial performance, when pay is measured by its realizable value,” said global director of compensation consulting Ira Kay of Watson Wyatt. “Executives who deliver above average performance are earning significantly more than those who don’t deliver. And many executives are losing great amounts of wealth when their companies perform poorly. Both are shareholder-friendly outcomes.”

Henry Waxman, the head of the House Committee on Oversight and Government Reform, released a 13-page report yesterday showing that outside executive pay consultants, supposedly neutral parties, are much more likely to recommend higher compensation if the consultant has other business relationships with the company.

The report begins:

"Corporate consultants can have a financial conflict of interest if they provide both executive compensation advice and other services to the same company. According to experts on corporate governance, consultants hired by corporate executives to administer employee benefit plans or to provide other services to a company may not be able to provide objective advice about the compensation of the executives who hire them. These experts have recommended that corporate boards should retain a compensation consultant that performs no other work for the company.

The report finds that compensation consultant conflicts of interest are widespread. Over 100 large publicly traded companies hired compensation consultants with substantial conflicts of interest in 2006. In many cases, the consultants who are advising on executive pay are simultaneously receiving millions of dollars from the corporate executives whose compensation they are supposed to assess."

The key findings of the report include:

• Compensation consultant conflicts of interest are pervasive. In 2006, at least 113 of the Fortune 250 companies received executive pay advice from consultants that were providing other services to the company.
• The fees earned by compensation consultants for providing other services often far exceed those earned for advising on executive compensation. In 2006, the consultants providing both executive compensation advice and other services to Fortune 250 companies were paid almost 11 times more for providing other services than they were paid for providing executive compensation advice. On average, the companies paid these consultants over $2.3 million for other services and less than $220,000 for executive compensation advice.
• Some compensation consultants received over $10 million in 2006 to provide other services. One Fortune 250 company paid a compensation consultant over $11 million for other services in 2006, over 70 times more than the company paid the consultant for executive compensation services.
• Many Fortune 250 companies do not disclose their compensation consultants’ conflicts of interest. In 2006, over two-thirds of the Fortune 250 companies that hired compensation consultants with conflicts of interest did not disclose the conflicts in their SEC filings. In 30 instances, the companies informed shareholders that the compensation consultants were “independent” when in fact they were being paid to provide other services to the company.
• There appears to be a correlation between the extent of a consultant’s conflict of interest and the level of CEO pay. In 2006, the median CEO salary of the Fortune 250 companies that hired compensation consultants with the largest conflicts of interest was 67% higher than the median CEO salary of the companies that did not use conflicted consultants. Over the period between 2002 and 2006, the Fortune 250 companies that hired compensation consultants with the largest conflicts increased CEO pay over twice as fast as the companies that did not use conflicted consultants.

Unions may not be the ideal solution for economists and capitalists, but they are one of the best ways to control executive compensation. At least that is the argument presented by Rafael Gomez and Konstantinos Tzioumis of the London School of Economics. A study conducted by the two found that union presence lowered CEO compensation by 10 percent, and the number rose when it was a CEO whose pay was in the top 10 percent.

The compensation is kept in check through the collective bargaining process that acts as a counterbalance - that is, when executives get a raise, the union sees it as a sign that the company is healthy and they deserve a raise. Also, Wall Street tends not to prefer unionized companies and therefore, lower stock prices mean less value for stock options granted to the CEO.

VeriFone (NYSE:PAY) announced yesterday that the company would be restating its financial results for 2007 following a misevaluation of the company’s manufacturing and distribution overhead that affects the cost of revenues. Interestingly, the CEO’s planned sales of 43,300 shares just last week may make for an interesting coincidence. Meanwhile, the options market paints a picture of many insiders knowing that something was going to go wrong soon – with the number of puts open hitting a high.

The SEC recently published its comprehensive review over the disclosure of 350 public companies for compliance with the new rules on executive compensation. Every company received a comment letter, which will be published along with the company’s response on the SEC’s EDGAR system within 45 days after the SEC completes its review.

So, what did the SEC find in its reviews? Well, the SEC commented that very few companies have disclosed details regarding their performance-based compensation, specifically their performance targets. These comments on performance targets by far surpassed comments in any other areas. In fact, only 45 of the top 100 companies disclosed the required specific targets. As well, many companies disclosed that they hired compensation committees but failed to tell investors how these committees analyzed executive compensation to determine appropriate amounts.

The SEC does not expect to make any additional rules in 2007 as they continue to review the effectiveness of this first major proxy season.