As the Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) saga continues to unfold and taxpayers realize that any government bailout could be $30 million less if their CEOs weren't grossly overpaid for driving the companies into the ground, a legislator wants to condition any possible intervention on salary controls.

Pennsylvania Democrat Bob Casey said such large pay combined with poor management makes it fair to "question the prudence" of any government assistance to Fannie and Freddie, but if assistance is offered it would be only if executive compensation is capped "at reasonable levels."

Regardless of where one stands on the executive compensation debate, legislative intervention is unarguably fair if tax money is going to be used to effectively rescue pseudo-private companies and their shareholders.

Justin Rood of ABC News points out how the CEOs of Fannie Mae and Freddie Mac broke the bank with their compensation last year as they literally began breaking banks with their management of the mortgage giants:

Daniel Mudd, the CEO of Fannie Mae (NYSE:FNM), received $11.6 million in salary, stock and other compensation for 2007. Richard Syron, CEO of Freddie Mac (NYSE: FRE), took home about $18.3 million last year.

In addition to Syron's salary, stock options and a $3.45 million bonus, Freddie Mac paid for a number of other perks for Syron, such as a car and driver, a home security system, travel costs for his wife, even $100,000 to pay his lawyer to negotiate his employment contract with the bank.

"Yes, yes," said Freddie Mac spokeswoman Sharon McHale, when asked if Syron's leadership was worth $18 million a year. "He's done a lot."

"That is the most outrageous of the current financial disasters," well-known bank analyst Richard Bove of investment firm Ladenburg Thalmann told ABC News. The crisis, he said, was caused solely by "mismanagement, for the purpose of massive personal aggrandizement. It's an outrage."

The Economic Times of India suggests giving directors a more complete set of tools to set executive pay with:

1. Market Assessment
2. Internal Pay Equity
3. Wealth Accumulation
4. Profit ‘set-aside ’

Market assessment [is the] first step in conducting a market assessment is ‘Peer Group Selection’ in light of the level of role complexity and job worth differences. The appropriateness of the peer group is an important issue that is raised constantly by members of remuneration committees.

Some say that CEO pay should be roughly twice the amount paid the next management level, and that a differential by a factor of two is ‘felt fair.’ There seems to be something to this ratio, in that the difference in every ‘real’ level of work would lead to a doubling of pay.

Another approach to determine executive pay is to set wealth accumulation targets over a number of years, given a pre-determined level of performance. Once executives start to exceed these levels, pay would be adjusted in terms of future base pay increase or future equity awards.

The final perspective on determining pay is to set it in relation to the company’s profits or net revenue , as is done in many ‘professional’ service firms, such as by investment banks, private banks and consulting firms. For example, among the investment banks or commercial banks with a substantial investment banking arm, total compensation and benefits typically constitutes between 30% and 50% of net revenues.

Forbes features an Oxford Analytica article drawing the obvious connection between poor company performance and complaints around CEO compensation:

Increasingly poor corporate performance, in the context of the current U.S. economic downturn, has raised shareholder discontent regarding governance and executive pay issues. This has fueled a slew of proxy challenges and demands for reforms to promote "shareholder rights."

Changes in corporate compensation practices are likely, but the most far-reaching moves are likely to be implemented by companies themselves, rather than by government regulation. In the case of troubled sectors such as finance, reforms may be applied to compensation standards for all employees, rather than focused on the senior executive level.

Imagine you are a CEO with a clause in your contract stipulating the company is liable for any legal fees you incur as a result of your job - sounds fair enough. Now, imagine that the legal fees you are incurring are related to a criminal investigation into whether you fraudulently manipulated your pay as CEO - delicious, isn't it.

On Tuesday just this occurred when Westar Energy Inc. (NYSE: WR) was ordered to pay former CEO David Wittig $1.67 million for legal bills related to a criminal case brought in 2003 alleging he used schemes to inflate his compensation while masking it from shareholders. After a long legal soap opera, Wittig is scheduled to go on trial for a third time in September on circumvention and conspiracy charges.

Though Wester is suing Wittig for breach of contract that would nullify its need to pay his legal bills, in the meantime they are on the hook. It's not bad being CEO...

On the other side of the world, the Sydney Morning Herald decries CEO Owen Hegarty's $10.7 million farewell package from the company Oxiana:

But the fact remains that [Hegarty] is already sitting on more than $60 million worth of stock (27.3 million Oxiana shares and 5 million options which are vested), and the proposal to pay out his maximum bonus for 2009, for being retired, and cash out options that are yet to vest sets a poor precedent in executive remuneration.

The whole point of performance pay is performance, not retirement. Retaining Hegarty's services as a non-exec will no doubt be cited as rationale by Oz Minerals, as will the fact that an "independent'' consultant had been given its imprimatur.

The first point is reasonable, the second not. If anyone can cite an example of a remuneration consultant which had ever advised that an executive was paid too much, please respond to the email address below.

A rare piece that adds something truly thoughtful, though still debatable, to the discussion of executive compensation, from Emirates' Business 24/7:

The field of executive compensation has long been dominated by "agency theory", which predicts a "positive relationship between executive compensation and firm economic performance". According to this view, managers receive pay-for-performance awards in order to give them incentive to pursue the shareholders' values; pay is established based on "arm's length contracting between shareholders and management".

Though this line of thought is pervasive among researchers (it's often considered the 'neoclassical' approach), the surprising truth is that little evidence exists to support such a relationship between executive pay and firm performance. In fact, some researchers attribute recent corporate scandals to the overemphasis on maximising shareholder value, without regard for the effects on other stakeholders...

With all this in mind, a new question arises: What's missing in executive compensation plans? The answer is clear: social responsibility. In the wake of corporate scandals such as Enron, in which highly paid but unethical executives wrecked havoc on their workers' lives, business ethics and corporate social responsibility have entered the discussion around executive compensation.

The Motley Fool takes a humorous look at the nebulous category of “other compensation” in SEC filings – pointing out that security expenses are a favorite:

Google's (NASDAQ: GOOG) Eric Schmidt, another guy with a $1 salary, got nearly $500,000 for personal security.

What the heck are these guys so afraid of, that shareholders should foot the bill for "other compensation" like security expenses? I've come up with some possible ideas:

• Killer mold.
• A group of terrorists kind of like the ones in that movie that time, you know, with Bruce Willis.