Management consultant and author of the book “So… You Call Yourself a Leader: 4 Steps to Becoming One Worth Following” Ken Siegel had an article in Forbes this week titled “CEO Pay As A Tool For Employee Disengagement.”

With median pay for CEOs of the biggest S&P 500 companies at $15.7 for last year, Siegel writes:

“While many of these CEOs and their boards will say they are worth it, few if any are sending the right message--or even a decent message--to their troops…The true reality is that top-level executives are living in an unconscionable fog. And when the fog lifts, the resentment of the underpaid, overworked employees will remain. The resentment harbored by these workers is deep and not forgotten. As soon as they can, they will leave...

There really is no way to defend a huge salary to the average worker… The best explanation is by actively leading the company, supporting the employees and sharing in the pain as well as the gain. Communicating the real issues facing the company and digging into the ranks, down to the lowest level, to find solutions to problems is a start; then, recognizing great work by those in the field and on the assembly line to solve problems--and financially rewarding those people, as well as one's self.

To do this takes communication, and it takes confronting the real problems facing the company to all. It takes creating task forces, including management, workers and others, to address problems. In essence, it takes turning the tables, and letting everyone know that the CEO gets paid "the big bucks" for a reason: to support the company, its jobs, its people--ultimately its shareholders; and that they may suffer a similar fate, together, in the event of failure…

To have a high salary and pull it off without resentment within the company--especially when the business is performing poorly--takes courage, transparency, and, above all, humility. All those human qualities will engage the troops--yet they are too rarely demonstrated, and even more infrequently observed.”

Aetna Inc. (NYSE: AET) Chief Executive Ronald Williams received $40.2 million in 2007 after the company's shares moved up more than 50% on the year before dropping again in 2008. The majority of the executive's compensation came from stock option grants, which he exercised during the past year to the tune of $32.8 million. Meanwhile, Mr. Williams is also eligible to receive an additiona $10.8 million in the future in the form of stock rights.

Ronald Williams is largely credited with turning around a troubled Aetna, but 2008 has erased much of his progress in 2007. The executive received a $1.096 million salary in 2007 with an annual bonus of $1.9 million and restricted stock valued at around $4.29 million. Mr. Williams "other compensation" totalled $104,162 for personal use of company aircraft and vehicles along with financial planning services and 401(k) contributions.

Shareholders saw improvements being made in 2007 with revenues increasing some 10% and operating earnings rising 20%. This is indicative of a turnaround in the form of increased operating efficiency and cost cutting measures. Investors may be a little bitter about the year so far in 2008, but the company insists that they need to pay executives to attract, motivate, and retain highly qualified individuals.

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Citigroup Inc. (NYSE: C) shareholders haven't been immune to the credit crisis, but executives are another story. Vikram Pandit, Chief Executive Officer of the firm, is facing widespread criticism over pay after his first annual meeting with shareholders since he took office after the financial crisis began.

Over a thousand people packed into Citigroup's annual meeting at the Hilton Hotel in New York with many of them cheering as shareholders got into line to slam executive compensation packages in the face of billion dollar sub-prime write-offs. Many of the comments made were off-base, but others posed serious questions that need answers.

Former Chief Executive Charles Prince walked away with an exit package worth $42 million in stock awards, pension payments and bonuses. Meanwhile, Gary Crittenden made $19.3 million even as shares halved during the past year as the company reported a series of major losses and write-offs.

Some shareholders attending the meeting may have stepped over the line by saying that (referring to executives) "people that could do that job are a dime a dozen ... there are probably plenty in here that could do it." Others accused the executives of doing "nothing to earn their money", charging that shareholders were being robbed.

Citigroup responded by stating that it believes the credit crisis is over half done through and that it is continuing to shed non-core assets at an aggressive rate in order to cut costs and increase efficiency. However, the bank that has already lost more than $30 billion in the credit crunch so far may have to do more than just talk.

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The AFL-CIO, one of America's most prominent unions, just released its report titled "2008 Executive PayWatch." This is the first in a multi-part look at the findings of the report:

"The chief executive of a Standard & Poor's 500 company made, on average, $14.2 million in total compensation in 2007, according to preliminary data from The Corporate Library. Problems with executive compensation came to a head in 2007 with large severance packages given to CEOs of companies at the center of the mortgage crisis. The International Monetary Fund estimates that the financial turmoil set off by the collapse of the mortgage market could total nearly $1 trillion. Yet, chief executive officers of the firms most responsible for causing the crisis collected hundreds of millions of dollars in pay last year. This highlights the need for further reform to protect companies and their investors."

Not surprisingly, the AFL-CIO report draws the obvious disparity between worker and executive compensation:

"A reasonable and fair compensation system for executives and workers is fundamental to the creation of long-term corporate value. However, compensation for top executives has grown at an unprecedented rate in the past two decades resulting in a dramatic increase in the ratio between the compensation of executives and rank-and-file employees.

The chief executive officers of large U.S. companies averaged $10.8 million in total compensation in 2006, more than 364 times the pay of the average U.S. worker, according to the latest survey by the United for a Fair Economy."

This is certainly not news to individuals that follow the industry, but coming from a prominent union it may draw increased attention. In up-coming posts, the focus will turn specifically to executive compensation in companies in the mortgage and housing sectors.

XTO Energy (NYSE: XTO) shares may have reached new highs following the rise in energy prices, but many shareholders are still outraged by its executives' pay checks. Chairman Bob Simpson was ranked among the nation's top paid executives last year and is set to make the list this year as well. Simpson will take home $3 million less, but is still set to receive around $56.6 million this year.

Simpson saw his annual cash bonus rise to $35.5 million while his salary also increased to around $1.3 million, but the value of his stock related compensation decreased to $19.5 million as the company's earnings slid in 2007. The executive also received $137,648 in reimbursements for personal use of a corporate aircraft along with a car allowance of $47,800 for the year. Finally, that is all topped off with $75,054 in "other compensation", according to a proxy filed with the SEC.

This may seem like a stretch, but XTO Energy was quick to note that the stock is up 5,700 percent since it went public in 1993. More recently, shares are up 36.5% last year and an additional 32.2% so far this year. The company also noted that it has recently become the fifth largest holder of natural gas in the United States, signaling a continued rise to power in the industry as a large player. XTO has also been rapidly expanding in the areas in which it operates.

Shareholders are arguing, however, that the increase is due more because of the energy market than actions take by the company specifically. Rising oil prices have been the result of increased demand and steady supply thanks to recent decisions by Saudi Arabia to reduce their exports. As a result, some shareholders are now proposing a new provision that requires directors to stand for election every year.

In the end, Simpson is one of the co-founders of the company with a large ownership stake. Despite his hefty compensation, the stock has managed to post impressive returns even when compared to its industry. As a result, perhaps shareholders should hold off on their criticism until he starts taking such large raises amid a downturn in the natural gas market. Then they will see the true test of a good executive.

Comcast Corporation (NYSE: CMCSA) chief executive Brian Robert's received a 20 percent pay cut in 2007 and the company's stock was one of the worst performers. The CEO - along with several other executives - received sharp criticism from shareholders for investing too heavily in its business in 2007 and ignoring shareholders. The stock recovered modestly this year after he took actions to help shareholders by issuing a dividend and initiating a share buyback program.

Mr. Roberts received total compensation of $20.8 million in 2007 compared to $26 million a year earlier. His pay this year did include a small rise in base salary and stock awards, but a reduction in other areas brought the numbers down. The executive also received other compensation, including $13,500 in retirement plan contributions and $270,898 in personal use of the company aircraft.

Shareholders upset with the executive compensation at the company also made several proposals in the proxy document. Among them was a non-binding vote on compensation, a requirement to nominate two directors for each opening, the elimination of the dual-class share structure, and a proposal to disclose the names of all executives who earn more than $500,000 per year. Not surprisingly, the company has recommended against all of these proposals.

J.C. Penney (NYSE: JCP) chief executive Myron Ullman received an eight percent pay cut this year because the department store chain didn't meet its performance targets. The executive took him compensation valued at just $10.1 million this year, consisting of $1.5 million in base salary with no bonus. The bulk of his compensation, however, was in stock and stock options valued at nearly $8 million. Of course, there are also the perks that come with the job. Ullman received $601,986 in other compensation that included $416,750 for personal use of a company plane.

J.C. Penney shares didn't have so much fun after the stock was cut in half from a high of nearly $85 per share to its current price around $41 per share. Luckily, shareholders will get a chance to bring the high flying executive back to the real world during the company's May 16th annual shareholders meeting. There they will have a chance to vote on a proposal that would require shareholder approval for any further severance agreements with executives as well as other aspects of executive compensation packages.

The board doens't like the idea, saying its human resources committee is in the best position to evaluate an executive's compensation package. They are concerned that shareholders may demand compensation packages so low that many executives may be at risk of leaving the company at a critical time. Sometimes executive compensation may seem high, but is necessary to retain key talent. How the situation actually unfolds remains to be seen...

Sempra Energy (NYSE: SRE) shares are off some 10 percent from their 52-week highs after profits slipped more than 20 percent, natural gas margins tightened, and liquefied natural gas business losses widened. Meanwhile, its generation business suffered from higher taxes and a three-month outage. Chief executive Donald Felsinger is also feeling the pain as he recevied a six percent pay cut, receiving just $7.3 million this year.

Felsinger received a base salary of $1 million along with $2 million in nonequity incentive payments and $91,219 in above-market returns on deferred compensation. He also received restricted stock and options valued at $3.9 million and $306,170 in other compensation, including a $93,483 401(k) contribution, $103,873 in insurance premiums, and $68,558 in tax reimbursements.

Interestingly, the stock price actually improved 10 percent in 2007 before dropping sharply at the beginning of 2008. This means that the executive's pay was tied to internal performance measures rather than external performance measures. This can be a good thing in some cases - like this one - but bad in other cases when executives fail to take actions to unlock shareholder value.

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A new research report by Equilar - the market leader for executive compensation benchmarking solutions - showed a decline in bonuses for chief executives while 10b5-1 stock trading plan usage is up. The study surveyed 178 companies with annual revenues of more than $1 billion, designed to represent the larger Fortune 500 firms.

The study found that CEO bonuses fied to annual performance plans fell by 18.6% while the prevalence of such payouts fell from 77.5% in 2006 to 70.4% in 2007. However, overall bonuses for chief executives grew by 1.4% over 2006 amid a rise in discretionary awards and cash payouts from annual and multi-year performance plans. The prevalence of these discretionary bonuses increased slightly.

The study also found a rise in the usage of 10b5-1 stock trading plans. The number of officers using this plan increased 5.5%, but the change actually reflects a slowdown in adoption rates. In 2007, 31.8% of Fortune 500 companies had at least one Section 16 officer using such a stock trading plan, which is up from just 28.7% the year before and 25.6% in 2005.

In the end, these results should be surprising given the poor performance of stocks. It looks like more bonuses are shifting from performance-based to discretionary while more executives are getting on plans to sell stock regularly.

New York Times (NYSE: NYT) chief executive Janet Robinson received a mere $2.1 million in 2007 total compensation - a 38% pay cut from last year. The executive's compensation consisted of a $1 million base salary and $1.1 million in non-stock incentive bonuses. She was eligible to receive up to twice her salary if certain targets were met, but the executive failed to attain the targets and received no stock options.

The decrease in compensation was mainly due to a policy change, however. The New York Times changed the timing of its awards to February following the year for which they are intended as compensation for. Robinson received 650,000 options as compensation in 2007 along with 65,000 in preferred stock. These amounts will be reflected in the executive's 2008 total compensation. So much for hoping...

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