The New York Supreme Court threw out four chargers against former New York Stock Exchange Chairman Dick Grasso, who made headlines in 2003 for his $190 million pay package. The Washington Post reports:

[Attorney General] Spitzer brought suit in 2004, a year after Grasso was removed from his post, claiming that the compensation package was exorbitant for the executive of a not-for-profit corporation. According to court documents, Spitzer contended that the compensation was not justified by the work performed by Grasso and therefore a violation of the Not-For-Profit Corporation Law. The suit also alleged that Grasso handpicked the NYSE board members who decided his package and they had ignored the board's system for calculating compensation.

The four claims against Grasso that have been tossed out were not based on specific state laws, but Spitzer argued that as attorney general he had the right under common law to act in the public interest. By contrast, the two remaining charges are based on state statutes regarding unlawful transfer of corporate assets and breach of fiduciary duty.

"It's more complex in the sense that they have to prove more than they otherwise might," said Richard Schulman, counsel at Bryan Cave who specializes in securities and business fraud litigation.

The Albany court's decision yesterday is being viewed by some legal and financial experts as a blow to attempts to rein in executive compensation.

"I think that this ruling clearly indicates that a court is going to be very skeptical in overruling an internal compliance committee in their determination so far as what is fair and reasonable compensation," said Steven Caruso, a partner at Maddox Hargett & Caruso.

An article from DowJones Online Financial News reports that investment bank CEO pay fell 43% last year - good news for those concerned about pay for performance given that it was a rough year for many investment bank shares. However, even after that 43% drop, pay averaged a staggering $27 million.

Interestingly, some executives at firms were paid more than their CEOs, such as two Goldman Sachs Group (NYSE: GS) co-presidents who earned more than $71 million compared to CEO Lloyd Blankfein's paltry $70.3 million.

From a The New York Times' article "How Big a Payday for the Pay Consultants?":

Compensation consultant biases can arise when a company’s board uses the same consulting firm for pay design as well as other services such as human resources management and outsourcing advice. Because the fees earned by consultants for compensation work are far less than what they make on other business, there is a risk that compensation gurus will put together cushy pay packages in order to snare more lucrative gigs elsewhere in the corporate empire.

Here’s an easy fix: Require companies to detail in proxy statements all fees paid to consultants they hire, for compensation design and all other services.

When the Securities and Exchange Commission rewrote the laws on executive compensation disclosure last year, it didn’t require public companies to detail consultants’ fees. This was a mystifying mistake.

A WSJ article titled "Firms Measure a CEO's (Net) Worth" examines the admittedly uncommon, but perhaps growing, practice of company boards taking stock of how much they have paid a CEO over his or her entire tenure when setting pay:

Last year, directors of fund manager Waddell & Reed Financial Inc. looked at the roughly $70 million Chief Executive Henry Herrmann had collected in stock, pension benefits and deferred compensation over his 36-year career, and deemed it "sufficient" for retirement, according to its proxy statement. The board stopped extra contributions to Mr. Herrmann's retirement fund.

Waddell & Reed is among a growing number of companies scrutinizing how much they have paid executives over time. Nearly 15% of Fortune 500 firms said they took such "accumulated wealth" into account in setting 2007 executive pay, up from 8.4% in 2006, according to data tracker Equilar Inc. Part of the increase is due to the Securities and Exchange Commission, which is encouraging companies to disclose the role of historical pay in their compensation decisions. Few acknowledge reducing CEO pay or benefits, as Waddell & Reed did.

Sony Corporation (NYSE: SNE) shareholders rejected a proposal during its annual shareholder meeting regarding executive compensation.

No, they didn't vote down an advisory 'say-on-pay' proposal, they literally voted to not know how much individual executives are compensated.

Only 39.7% of shareholders voted in favor of Sony disclosing the individual pay of top management, rather than aggregate pay as is currently done. Sony CEO Howard Stringer, who has captained Sony through its most recent series of blunders, not surprisingly was against the proposal.

The climate surrounding executive compensation is clearly calmer in Japan right now, but how far the vote came from reaching the two-thirds majority needed is shameful given Sony's loss of market share in key sectors combined with loss of its innovative edge over the last 3 years.

Here is BloggingStocks' take on whether "macroeconomic woes" should affect CEO pay:

On one level, criticizing rising executive pay based on the performance of the economy is grossly unfair: executives should be paid based on their marginal value to the company, not based on broader economic trends that they have no control over. The problem is that executives routinely benefit from factors they have no control over: any CEO of any oil company is doing quite well just for being in the game. When things are going well, everyone's happy, and shareholders generally don't complain about CEO pay when they're earning double-digit returns. But when CEOs don't take a hit with the shareholders on the way down, it's not fair. CEOs are in the ideal "Heads I win, tails it wasn't my fault and I still win" situation.

Right now, companies can be run by small clique of insiders who have virtually no stake in the company's long-term future -- and decades can go by without any accountability. Until that changes, executive compensation in America will continue to be a disaster.

Not surprisingly, a soon to be published academic paper shows that independent boards lead to a stronger link between CEO pay and company performance:

“In this paper, I find that the independence requirement imposed on boards of directors by the Sarbanes-Oxley Act of 2002, together with the governance regulations subsequently introduced by stock exchanges, affects CEO pay structure,” explains the paper’s author Teodora Paligorova, in its abstract.

“In firms whose corporate boards were originally less independent, and thus more affected by these provisions, CEO pay for performance strengthened while pay for luck decreased after adopting SOX,” it finds. “In contrast, those firms that exhibited strong board independence prior to SOX showed little evidence of pay for luck and little change in pay for performance following the adoption of SOX.”

The results are consistent with the rent-extraction hypothesis -- which suggests that weak corporate governance allows entrenched CEOs to capture the pay-setting process -- it adds.

The Associated Press looks at politicians' use of 'say on pay' as a cudgel:

Sen. Barack Obama, the presumptive Democratic nominee, has proposed writing the concept, known as "say on pay," into law. Republican Sen. John McCain wants to encourage companies to give shareholders a say but without legislating the idea.

The McCain approach is similar to what President Bush has done — jawboning corporate America over extravagant pay packages but opposing "say on pay" legislation.

Executive pay rings a strong populist tone on Capitol Hill and the campaign trail, especially when the economy is stumbling and stocks are falling.

"Say on pay" legislation cleared the House last year by a 2-to-1 margin but has gone nowhere in the Senate. It has been opposed by the White House and most Republicans.

The legislation won't necessarily become law, though. Populist rhetoric and bold legislative proposals play well, but enacting laws to change corporate governance is another matter.

The say-on-pay legislation "could be a catalyst," said Amy Borrus, deputy director of the Council of Institutional Investors, a group representing public pension funds. If the Senate Banking Committee were to take up a proposal, that could "get more companies to take the issue seriously and act on it," she said.