General Motors (NYSE: GM) Chief Executive Rick Wagoner received $14.4 million in 2007, which is up 41% from the $10.2 million that he made in 2006. Ironically, this high compensation comes at a time when the auto maker has worked to cut costs and shed billions in retiree benefits. Meanwhile, GM itself lost $38.7 billion in 2007, but much of that can be attributed to a huge non-cash loss of tax credits that the company had been holding on its balance sheet.

Mr. Wagoner's base salary for 2007 came in at $1.6 million while he also received $1.8 million in incentive plan compensation and $230,688 for perquisites and benefits, including personal security. The bulk of the executive's pay came from stock options and grants awarded to him throughout the year at favorable prices. Stock awarded for this upcoming year, however, is contingent on performance goals being met.

At least one shareholder has voiced concerns about this compensation. John Lauve announced his intention to nominate 10 candidates for election to the board, but he has nominated candidates each year since 2000 without success. He has never conducted a proxy solicitation for his candidates and therefore they have never been put on the ballots. Other stockholder concerns deal with topics like cutting greenhouse gas emissions, disclosing political contributions, heathcare return, executive compensation, cumulative voting and special stockholder meetings.

After examining the scale of CEO pay relative to the average worker and how CEO pay often has little correlation to performance, the AFL-CIO's "2008 Executive PayWatch" calls attention to CEOs control over their own salaries:

"Some CEOs may have far greater control over their pay than anybody previously suspected. Angelo Mozilo, chairman and chief executive officer of Countrywide Financial Corp., brought in a second compensation consultant to renegotiate his package in 2006 when the first one said his pay package was inflated.

In an e-mail message, Mozilo complained to John England of Towers Perrin, who helped redo his pay package: “Boards have been placed under enormous pressure by the left-wing anti-business press and the envious leaders of unions and other so-called ‘C.E.O. Comp Watchers.’” Mozilo’s renegotiated contract with Countrywide included an annual salary of $1.9 million, an incentive bonus of between $4 million and $10 million, perks and fringe benefits, as well as $37.5 million in severance benefits. Under public pressure, Mozilo subsequently agreed to give up the severance package.

Excessive CEO pay is fundamentally a corporate governance problem. The board of directors is supposed to protect shareholder interests and ensure that CEO pay reflects performance. However, at approximately two-thirds of companies, the chief executive officer also chairs the board. When the same person serves as both chairman and CEO, it is impossible to objectively monitor and evaluate his or her own performance.

CEOs also dominate the election of directors. The vast majority of directors are hand picked by incumbent management. Because of the proxy rules, it is prohibitively expensive for long-term shareholders to run their own director candidates. Moreover, even if a majority of shareholders withhold support from directors, they still are elected to the board at many companies.

Ultimately, shareholders have to be able to trust their boards of directors to set responsible CEO pay packages. For this reason, CEO pay will be reformed only when corporate boards become more accountable. Until then, CEOs will continue to influence the size and form of their own compensation, and CEO pay will continue to rise."

In the second installment of coverage of the AFL-CIO's "2008 Executive PayWatch" report, the disparity between pay and performance - not just the sheer amount of compensation - is critiqued:

"Boards of directors are responsible for setting CEO pay. Frequently, however, directors award compensation packages that go well beyond what is required to attract and retain executives and reward even poorly performing CEOs. These executive pay excesses come at the expense of shareholders, as well as the company and its employees.

According to a recent study by ERI Economic Research Institute and The Wall Street Journal, executive compensation grew substantially faster than corporate earnings in the past year. The study of 45 randomly selected public companies found that executive compensation increased 20.5 percent from a year ago, while revenues grew just 2.8 percent.

During the past 12 months, overall total compensation of the highest-paid executive increased 20.5 percent while revenues increased 2.8 percent, the study found. As of February 2008, the average top executive received overall total compensation of $18,813,697, according to the study. In comparison, the median pay for workers rose only 3.5 percent to $36,140 in 2007, from $34,892 the previous year, according to the U.S. Bureau of Labor Statistics.

Moreover, while performance-based bonuses for chief executives of large public companies dropped in 2007, companies more than made up for that decline by giving out bigger discretionary bonuses and other payments not tied to a specific financial target, according to a recent study by Equilar, the executive compensation research firm.

Equilar found that the median value of bonuses tied to performance fell 18.6 percent in 2007, from $949,249 to $772,717. Thanks, however, to sizable increases in discretionary awards and multi-year performance awards, overall CEO bonuses for 2007 inched up 1.4 percent to a median value of $1.41 million from $1.39 million in 2006."

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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