Executive compensation in the UK is quickly closing the gap with the USA, according to a new report by the FSA. The study found that total earnings by chief executives at British blue-chip companies have doubled over the past five years. Another study conducted at the University of Pennsylvania showed that US CEOs' average pay was 1.6 times that of their UK counterparts in 2003, down from 2.2 times six years ealier. Some are blaming compensation consultants for these mishaps as those are the ones that help align CEO incentives with shareholder interests. Others suggest that the government should impose regulatory caps, but history has shown that government intervention creates many more problems than it solves.

Merrill Lynch & Co. chief executive E. Stanley O'Neal announced his retirement today following a three day drama surrounding his future after the firm announced a nearly $8 billion writedown in the value of its securities as a result of subprime and credit markets. The ex-CEO also angered board members when he approached Wachovia Corp about a possible merger without board authorization.

"We would like to thank Stan for the contribution he has made leading a major transformation of Merrill Lynch into a global and diversified company with enormous potential ahead of it," Cribiore said in a statement. "His commitment to the company, its clients, shareholders and employees has never wavered and the company will reap tremendous benefits in the future from his work."

Alberto Cribiore has been appointed as interim chairman and will also chair a committee that will evaluate other CEO candidates. Merrill presidents and COOs Ahmass Fakahany and Gregory Fleming will run the company while a search is conducted. And with a possible $4 billion in additional writedowns, they may have their work cut out for them.

The decision to oust Merrill Chief Executive Stan O'Neal could cost the company millions. A regulatory filing shows that a combination of his company holdings, retirement benefits and a severance package could cost upwards of $200 million. Problematically, the compensation committee is filled with O'Neal allies, including Chubb CEO John Finnegan, who is a former colleague from their days at GM and Alberto Cribiore who has been a strong supporter of O'Neal. So, while the company does not have a non-takeover severance package in place by default the compensation committee will likely grant one. The executives dismissal comes after a record $8.4 billion quarterly writedown that came as the result of risky subprime lending and CDO trading.

Merrill Lynch announced that it cut worker compensation in half in the third quarter, which means big bonuses could suffer this year. The investment firm spent $1.99 billion on compensation during the July-September period compared to $3.94 billion during the same quarter last year and $4.76 billion during the second quarter of this year.

'Merrill Lynch remains focused on paying its best performing employees competitively,' the company said in a statement. 'In the same vein, it may be necessary to accrue compensation expense at a higher level in the fourth quarter to ensure it can appropriately reward employees whose performance will drive future growth.'

Institutional investors sent a letter to Verizon Communications last week urging the company to give shareholders a greater say in the pay packages given to executives. A vote in May narrowly came out in favor of asking Verizon to adopt a say-on-pay policy to help rein in executive compensation.

"More than half of the people who you represent on the board of directors sent you a message that we want more transparency and accountability in executive pay at our company," the investors said in the October 17th letter. "As institutional investors, we are concerned by the disconnect between executive pay and corporate performance at Verizon and other public companies ... If you truly intend executive pay to reward superior performance, serious adjustments to Verizon's pay practices are in order."

The institutional investors involved in this ordeal include the North Carolina state treasurer, Connecticut deputy treasurer, the New York State Teachers' Retirement System, the City of Cincinnati Retirement System, Walden Asset Management, Marianist Province of the United States, and Boston Common Asset Management.

Women are making more money than ever before in the higher echelons of companies, but their pay is still falling behind that of their male counterparts. The best paid female executive was Morgan Stanley's Zoe Cruz, who took home $30 million in total compensation last year. Yahoo's Susan Decker takes second place with a $25 million paycheck last year. Others include eBay's Meg Whitman ($11 million) and Avon's Andrea Jung ($10.7 million). However, these numbers fall behind their male counterparts. Bob Nardelli, former chief executive of Home Depot, took in a whopping $133.7 million while Viacom's CEO Tom Freston took home $71.6 million. In the end, the 25 best paid men took home $1.3 billion in 2006, which amounts to 4.35 times more than the 25 best paid women.

Researchers at the University of Colorado Boulder recently conducted a study that found press coverage of executive compensation may be one of the reasons it is gaining speed. The researchers started with the theory that the more attention a CEO received in the media, the greater the variable compensation - that is, all compensation other than their salary.

"Our findings suggest that the press appears to contribute to high CEO pay, which is ironic given some journalists' concerns about outsized CEO compensation," said Markus Fitza and associate professors Mathew Haward and Kai Larsen in a recent paper.

The researchers examined more than 1,500 companies and CEOs from 1997 to 2005 and how often they appeared in Business Week, the New York Times, Wall Street Journal and other major national business publications. They found that each major business news publication increased a CEO's variable compensation by more than $650,000. More, a picture in one of these publications increased it $1.1 million!

Hedge fund managers have been able to get away with millions of dollars of tax free money thanks to a loophole that is just now about to be closed. The Senate plans to dramatically limit hedge fund managers' ability to put off paying their taxes by introducing a bill that would prevent them from using offshore havens to defer taxes on large amounts of income.

The proposed legislation would cap the amount of compensation that managers can defer each year to the same amount other tax payers are permitted to place in 401(k) and IRAs - $19,500 per year. This compares to the current law that enables them to put off income taxes for years by investing them in their funds and letting it grow tax-free in the meantime!

This new piece of legislation comes just months after another tax proposal that would raise taxes on "carried interest" paid by managers of private equity, hedge funds, VC funds and some real estate deals. The carried interest would be taxed as income as opposed to as capital gains on the investment. Both of these pieces of legislation are considered long-overdue by many and should provide a nice boost to tax revenues.

The SEC announced that it would launch a probe into Countrywide CEO Angelo Mozilo's 10b5-1 stock sales plan. These plans allow executives to sell a set number of shares on a set timetable if the executive has no knowledge of material company events. The programs even allow shares to be sold during black-out periods and when executives do have material information as long as the time and number of sales was set in advance.

Mozilo appears to have violated these rules by changing his plan to accelerate sales. The Wall Street Journal reported that he sold at least $130.6 million in company stock during the first half of the year. If the CEO did make changes or knew anything about the mortgage meltdown that happened afterwards, he could find himself in a world of hurt. We won't know, however, until the SEC completes its investigation. All we know now is that the man made a lot of money and sold at just the right time...

CBS Corporation announced today that it had reached an agreement with chief executive Leslie Moonves to chop his cash compensation while expanding his equity stake in the company. His compensation will now be just $3.5 million a year; however, he will be eligible for "significant equity compensation" and bonuses tied to the performance of CBS stock. The new agreement also expands his role from the prior 2009 deadline to 2011 now. CBS declined to say why these changes were implemented now, but they come after much shareholder criticism. Some still have concern, however, that the performance bar for bonuses and equity compensation may be too low. However, this is definitely a move in the right direction.

Insurance companies may be tightening their budgets going forward, but executives certainly aren't feeling the pain. Since the major hurricanes of 2004 and 2005, many executives have enjoyed huge increases in compensation stemming from strong performance. However, this compensation has not declined since insurance companies have begun cutting back in today's more difficult environment. State Farm, for example, announced that it was dropping coverage for around 2,600 policyholders while CEO Edward Rust received $11.7 million this year compared to $5.5 million in 2004. Similarly, Alfa Insurance dropped 4,600 policyholders while its CEO received $1.7 million this year - a 25% increase year over year.

A new book entitled "Myths and Realities of Executive Pay" by Ira Kay argues that executive compensation may be fair after all. Kay believes that executive compensation is the reason for - in no small part - the rise of the Dow Industrial average, which stood at 5,000 in 1996, to well above 13,000 now. These high compensation amounts motivate executives to make difficult decision like move offshore and sell off businesses. After all, without compensation to align the interests of shareholders and management we would likely see more businesses that are run by families or majority shareholder control - that is, those that are resistant to positive change that would generate shareholder value. Now, whether the compensation also makes executives act with a more short-termed outlook is another topic entirely. Perhaps companies should start issuing LEAPS or restricted stock to executives instead of short term options that they can sell off in just a few months.

Michigan Senator Carl Levin is widely credited with doing the most to pad the paychecks of America's top executives. He was the man behind the single biggest factor influencing the stock option explosing in the 1990s - the change in the tax code that limited the tax deductibility of executive pay to $1 million unless that pay was "performance based". Since stock options are based on the appreciation of the underlying stock, it is considered a performance based alternative to cash. As a result, the issuance of stock options soared which has led to the spectacular increases in compensation seen during the past few years.

Last week, the Senator proposed another bill that would include stock options under the $1 million cap while also raising taxes on options grants generally. His theory is that this will net the treasury $5 billion a year. Sound familiar? It is nearly identical to the theory behind the past changes in executive compensation tax laws. However, instead of reining in compensation and increasing the tax rake it actually ended up in more compensation via other methods which ended up paying even better. The lesson: Corporations do everything they can to avoid taxes.

Countrywide Financial CEO Angelo Mozilo sold truckloads of stock just before the subprime market collapsed. The chief executive started a plan in October 2006 in which he raised the number of shares that he could be sold twice, once in December 2006 and again in February - both at near all-time highs. Many investors are questioning whether or not these sales were fair or whether it was a case of good old-fashion insider trading.

Mr. Moore, the treasurer of North Carolina, recently wrote the SEC asking that the agency look into the sales, "As an investor and a Countrywide shareholder, I was shocked to learn that C.E.O. Angelo Mozilo apparently manipulated his trading plans to cash in, just as the sub-prime crisis was heating up and Countrywide’s fortunes were cooling off."

Whether or not any of these accusations can be proven remains to be seen, but the SEC is likely to at least look into the matter following the request by Moore. The case also brings into question what exactly is considered fair practice when it comes to buying and selling of company stock...

The Securities and Exchange Commission says that corporations are falling short of their requirements to explain to investors exactly how executives are being compensated and for what work. Officials completed their first review of the new pay disclosure rules yesterday and called on corporations to give ivnestors more insights into how they make compensation decisions and to ensure that proxies containing pay votes are very clear and understandable. Meanwhile, boards of directors could also be doing a better job in discussing exactly how they choose performance targets, severance packages and peer companies that they use for comparison. In the end, the SEC stated that they found a lot more disclosure but a severe lack of analysis. That is, while companies are disclosing all the appropriate numbers, they fail to explain to investors exactly why executives are earning the compensation that they receive.

The SEC has also kept extremely busy reviewing these compensation reports over the summer. In fact, over 250 letters were sent asking that companies provide additional explanations and data; however, most of these were requests that companies keep these things in mind for the future instead of amend existing filings. In the end, this year is more of a testing phase for companies to get use to the rules before they are strictly enforced by the SEC. Regulators are expected to start cracking down on companies omitting disclosures next year - particularly those that do not give or explain performance targets or give any context to how difficult the goals are to achieve.

Sprint Nextel Chairman and CEO Gary Foresee has stepped down after two years over overseeing the $35 billion merger. The company announced that CFO Paul Saleh will fill his shoes as acting CEO while the company searches for a new leader. The news comes after both internal and external pressure for a new chief executive following the company's recent lackluster performance.

"The board's search for selecting its next chief executive will focus on candidates outside the company," said a company spokesperson. "We fully expect that the search will be concluded in a timely manner and we are focused on selecting the right candidate to guide the company to achieve its full potential. Sprint Nextel has the assets, spectrum, customer base and technology to be the leader in wireless mobility services."

Two executives at Research in Motion (RIM) will pay another $2.5 million each as part of a tentative settlement reached with one of its shareholders over the company's option granting policy. The Blackberry-maker said Friday that it had reached that agreement with the Ironworkers Ontario Pension Fund, which launched legal action earlier this year. The fund had been seeking $105 million in damages. The $2.5 million today comes on top of the $5 million they've each already agreed to repay to the company to defray its costs for conducting the investigation. The two men continue to share the title of CEO and hold significant shares, but stepped down as Chairman of the Board.

Cisco Systems Chief Executive, Jonathan Chambers, took home a pay package for 2007 valued at $12.8 million. The executive also pocketed more than $50 million in stock options as the company's stock continues to outperform the market. Shareholders have nothing to complain about, however. Chambers took over as CEO in 1995 when the company had about 4,000 employees and less than $2 billion in sales; the company now has about 61,500 employees worldwide and $34.92 billion in revenue in 2007.

The Securities and Exchange Commission has a new target since enforcement chief Linda Chatman Thomsen revamped regulations regarding stock-trading plans for corporate executives, compensation experts, corporate counsel and brokerages. On October 10th, Thomsen will review the current 10b5-1 trading plans that many believe are flawed. Many are speculating that this move will uncover a whole new set of executives that were potentially insider trading - a number that could reach into the hundreds if not thousands of executives according to many lawyers.

“The idea [of the original rule] was to give executives a safe harbor to proceed with these prearranged trades.... However, recent academic studies suggest that the rule is being abused,” Ms. Thomsen said in remarks at the Corporate Counsel Institute in March. “If executives are in fact trading on inside information and using a plan for cover, they should expect the safe harbor to provide no defense.”

Microsoft Corporation's Steve Ballmer took a jab at Oracle CEO Larry Ellison's compensation in an article in The Times. Despite being a billionaire, Larry Ellison took home a pay package valued at $61.2 million and stock option gains of nearly $182 million for the year ending May 31. Meanwhile, Mr. Ballmer was not awarded any stock options and his pay and bonus totalled a mere $980,000. "I'm sort of like a parent to this little child and I'm a large stakeholder in Microsoft," Ballmer told The Times. "And I certainly feel like if I do a good job I'll be well rewarded in the appreciations of our shares."

News broke in Germany over the weekend that Chrysler President Tom LaSorda and former Chief Operating Officer Eric Ridenour were paid bonuses worth millions for their help with the sale of the automaker earlier this year. While the exact amounts of these bonuses are unknown, Erich Klemm - a German labor representative on DaimlerChrysler AG's supervisory board - called them "unreasonably high". This situation begs the question as to whether executives that take positions in troubled companies deserve greater compensation in line with greater job risk. Many companies in hard times are cutting employee compensation and benefits while hiring a high-calibur exeuctive to try and turn it around. Is this trade worth it in the long-run for all parties involved?

Executive compensation is set to rise over 16% during 2007, according to a study conducted by accounting firm KPMG. This rise marks an acceleration from last year's 9% rise and causes greater concern for many shareholders and watchgroups that have been protesting excess compensation and perks.

"Indeed, an interesting phenomenon in the data this year is that among FTSE-100 companies operating share option plans, the grant levels are greater than the normal grant limits, indicating that companies may be using the exceptional circumstances' clauses typical in many plans, and perhaps also the influence of some uncapped plans," said Mary Carter, a partner at KPMG. "This has led to the median actual grant being higher than the median maximum grant opportunity for both FTSE-100 chief executives and FTSE-100 finance directors."