La-Z-Boy Inc. (LZB) has been hit hard by the slump in the housing market and the overall decline in consumer spending. This means that the firm's top 120 managers might not get as much incentive pay since part of their compensation is based on three years of the company's earnings. Now, the board is faced with a decision to either face a mass exodus of talent or change up the company's executive compensation plan to give management another change. It's a difficult situation that will either alienate shareholders or management.

The board determined that the drop in LZB have made its stock awards program unrealistic and would not provide management with incentives during the three year period. So, the board decided to dump its long-term plan in favor of two short-term ones. Now, La-Z-Boy executives can earn 50% of their stock wards based on the company's performance from December 28th to April 26th (just four months!) and the other half in fiscal 2009 beginning in late April. Shareholders argue that changing the rules mid-game defeats the purpose of such programs...

A Watson Wyatt Worldwide poll found that a significant number of U.S. companies do not plan to disclose performance goals for their executive pay programs in their 2008 proxy statements. In fact, only 42 percent of companies plan to disclose the specifics while 31 percent have no plans to reveal goals at all! The SEC instituted the new disclosure rules effective in 2007 in order to provide investors with a clearer picture of executive compensation; however, the rules only request companies provide the information unless it would result in competitive harm.

"Setting sufficiently challenging performance goals and appropriate corporate performance metrics is an extremely important part of the executive pay process," said Ira Kay, global director of executive compensation consulting at Watson Wyatt. "The SEC has put significant pressure on companies to disclose their goals so that shareholders can determine if programs are paying for performance. However, companies are still struggling with the decision of whether to disclose this information."

U.S. Bankruptcy Judge Robert Drain approved Delphis bankruptcy reorganization plan on the condition that it reduce its proposed $88 million cash bonus pool by more than 80%. The company had planned to dish out $87.9 million in cash bonuses, but that amount must now be reduced to just $16.5 million. That number must also include any cash bonuses that are given to people like Chairman Steve Miller, who was to receive an $8.3 million bonus when the company leaves Chapter 11. The move to reduce the compensation comes after complaints from the UAS and International Brotherhood of Electrical Workers. Either way, this is a great win for those fighting excessive executive compensation.

The world of executive compensation works in much the same way that professional baseball works- much of your compensation is based on your peers. Often times, executive compensation begins by taking a look at how much a chief executive's peers are making - that is, in companies in the same industry with a similar size. The compensation committee then forms a plan that incentivizes the executive to perform with stock options and perforance-based bonuses.

Investors can find a breakdown of these figures in the company's proxy statements. New compensation rules are supposed to make things easier than ever for individuals to evaluate executive compensation, but there is still a lot of work to be done. In particular, executives do not have to include long-term stock grants in their total compensation amounts, which can make things slightly misleading when making peer comparisons and other measures.

Many people are upset with executive compensation but in reality there are some bad apples that ruin it for the bunch. Many chief executives are brought into companies in order to help turn them around and they are often worth the price. Others have been with the company for many years and have unparalleled knowledge about the company and are often worth the price as well. It’s the underperforming chief executives that promise turnarounds or others who are installed as part of a family business and shield themselves with poison pills that cause the problems.

There is often insufficient objectivity in many board rooms, but board members do not necessarily approve a lucrative package out of friendship. Rather, they understand how hard and risky the post can be and recommend pay accordingly. There is also a lot of pressure from outside investors these days for performance that can make the chief executive post more difficult than ever before. So, before you criticize the practice as a whole, it may be a good idea to take a look at it from a case by case basis.

Bonuses on Wall Street are healthier than ever despite a horrible year for almost all players in the financial industry. All the numbers are now out and bonuses in 2007 totalled $39.34 billion - up 8.7% from $36.19 billion in 2006. Only Merrill Lynch and Bear Stearns are the only two banks that saw their bonsues fall while the rest rose substantially. Now, some of this can be traced back to an increase in headcount at many brokerages, and if you take out the profitable Goldman Sachs then the number drops to just 3.5%. Are these bonuses justified? With record losses, you'd think it'd be hard to do so!

The Shareholders Association for Research and Education (SHARE) released its 2007 Key Proxy Vote Survey today showing growing support among investment management firms for selected shareholder proposals that address excessive executive compensation. However, success was mixed at best. Firms like Manulife FInancial passed a limit to supplemental executive retirement plans while firms like Nortel Networks failed to pass resolutions despite strong shareholder support.

"Executive compensation was the big issue last year," said Executive Director Peter Chapman. "Continuing shareholder efforts to tie executive compensation to performance and concern about 'pay for failure' helped drive a number of resolutions aimed at curbing excessive executive pay packages for executives. Our survey showed strong support for these proposals."

The Tyson Foods Inc. (NYSE: TSN) board of directors may find themselves in trouble after Proxy Governance Inc. recommended that shareholders withhold their support for the board in light of excessive compensation amid operational underperformance. Tyson underperformed its peers and failed to take action to respond to industry challenges like increased feed costs and beef export restrictions. Meanwhile, the approved pay for CEO Richard Bond amounting to $24.6 million - 82% more than CEOs of other companies in the peer group! Is this pay out of touch with reality? Well, maybe just a little bit...