BusinessWeek features an article on deceased management consultant Peter Drucker's view of executive pay:

Drucker's stance on the issue, articulated consistently over many years, was controversial. But it was rooted in his belief that the best leaders are those who understand that what comes with their authority is the weight of responsibility, not "the mantle of privilege," as writer and editor Thomas Stewart described Drucker's view. It's their job "to do what is right for the enterprise—not for shareholders alone, and certainly not for themselves alone."

What Drucker thought was more appropriate was a ratio around 25-to-1 (as he suggested in a 1977 article) or 20-to-1 (as he expressed in a 1984 essay and several times thereafter). Widen the pay gap much beyond that, Drucker asserted, and it makes it difficult to foster the kind of teamwork that most businesses require to succeed.

"I'm not talking about the bitter feelings of the people on the plant floor," Drucker told a reporter in 2004. "They're convinced that their bosses are crooks anyway. It's the midlevel management that is incredibly disillusioned" by CEO compensation that seems to have no bounds.

This is especially true, Drucker explained in an earlier interview, when CEOs pocket huge sums while laying off workers. That kind of action, he said, is "morally unforgivable."

With some news coverage painting the current situation as a financial apocalypse, you might expect that CEO pay might temporarily cool-off given it is often pointed to as partially responsible for our problems. Fear not, CEO pay fans, things seem to be progressing as usual.

Washington Mutual Inc.'s (NYSE: WM) incoming CEO Alan Fishman is effectively guaranteed $12.65 million next year in addition to his $7.5 million signing bonus. Also, in case things go south for Fishman before the end of his first year even, he is guaranteed a golden parachute of $10.5 million for "termination without cause."

Turns out it is a bad time to hold WaMu stock, but a good time to be WaMu CEO.

A new paper, "Beyond the Boardroom: Considering CEO Pay in a Broader Context," argues that excessive CEO pay is bad for a company (not surprising), but the authors also give suggestions for aligning pay and performance throughout company ranks:

• As many employees as possible should be part of an organization-wide, pay-for-performance model; merit increases should allow for significant differentiation between employee and company performance.
• The organization's bonus plan generally should use similar metrics for both employees and the CEO; the funding percentages should be somewhat alike.
• Stock incentive plans should stem from board-level decisions over who is eligible, but participation should be limited to top performers.
• Limits should be placed on special awards and perquisites not linked to performance.

Expect Fannie and Freddie executive compensation to become even more of a hot-button issue as more politicians take note of the contradictions of huge pay followed by a huge government bailout. From Reuters:

Democrats on Tuesday criticized the multimillion-dollar pay packages awarded to the former chief executives of Fannie Mae and Freddie Mac at a time when taxpayers could foot a massive bill for the companies' bailout.

In a joint letter to Fannie and Freddie's regulator, Senators Charles Schumer of New York and Jack Reed of Rhode Island said the combined pay and bonus packages of about $24 million should be revised.

"We find it way out of line," they said in the letter, saying the severance pay for former Fannie Mae CEO Daniel Mudd and former Freddie Mac CEO Richard Syron should be questioned especially if any financial losses could have been caused by errors in management.

The U.S. Treasury Department over the weekend seized control of the two government-sponsored entities, which together back about half the country's $12 trillion in home mortgages.

A letter to the editor from Larry Checco running in today's The Washington Post:

As the federal government moves to rescue Fannie Mae and Freddie Mac ["U.S. Seizes Control of Mortgage Giants," front page, Sept. 8], perhaps this is the perfect time to send a clear signal to the rest of the financial services industry that executive compensation packages need to be more in line with executive performance.

For years, while this whole mortgage crisis was festering, the top executives of Fannie Mae and Freddie Mac were taking home multimillion-dollar salaries and bonuses. Oh, sure, they suffered some. For example, Fannie Mae CEO Daniel H. Mudd took a 15 percent pay cut in 2007 and took home a measly $14.2 million in total compensation, a pittance in comparison with what some of his predecessors received. Meanwhile, his company's stockholders watched in horror as the value of their shares eventually decreased by 90 percent.

So, I'd like Treasury Secretary Henry M. Paulson Jr. to start setting the example for every industry and organization through decisions on compensation for Fannie's and Freddie's new top executives.

From the UK's Executive Digital:

Deloitte has revealed that high-flying Chief Executives are thriving in the credit crunch even though the pace of pay rises in the boardrooms of Britain's top 350 companies has slowed in the economic downturn.

Directors of the UK’s largest companies enjoyed pay rises well above inflation with the average pay increase for bosses of the largest 350 companies on the FTSE share index standing at 6.2 percent.

However, this was down from seven percent the previous year.

The gap between the potential pay of the Chief Executive and the rest of the board is also increasing, according to the survey.

From The Economist:

How executives are rewarded is one of the many mysteries of China’s increasingly powerful companies.

A new study by Zhihong Chen and Yuyan Guan, of the City University of Hong Kong, and Bin Ke, of Pennsylvania State University, casts a rare beam of light.

The authors examine “red chips”—companies operating in China but incorporated abroad and listed in Hong Kong. For many years this was the main way in which big Chinese companies interacted with the capital markets. The 83 mostly state-controlled companies covered by the study’s final year of data, 2005, account for more than half of the stockmarket value of all Chinese firms and more than one-third of the capitalisation of the Hong Kong Stock Exchange.

Senior executives’ cash pay was low by global standards: $180,000 a year on average. Almost every firm awarded stock options, worth an average of $140,000, giving bosses healthy top-ups as well as equity stakes—if those options were exercised. Remarkably, a lot never were. At more than half of the firms, no options were exercised within four years of vesting.

From the Economic Times of India, a look at pay that is obscenely high relative to the company's earnings:

At a time when astronomical CEO compensation has come under scrutiny globally, a section of India Inc seems to believe that even sky isn’t the limit. A number of corporate honchos take home salaries disproportionate to the profits their respective companies generate.

In some cases, it is as high as 25% of the net profit. ETIG studied the compensation of top executives of public companies to draw up a list of obscenely paid execs.

Future Capital chief executive officer Sameer Sain tops the list with a compensation that is 24.3% of his company’s net profit. IL&FS Investsmart CEO James Whiteford and Bayer CropScience MD Stephen Gerlich grossed more than 10% of the net profit of the respective firms.