The aftermath of the wreckage on Wall Street may be felt throughout the world, but it has definitely not hit the pocketbooks of those working on Wall Street. Wall Street bonuses totaled $33.2 billion in 2007, down just 2 percent, by the estimates of the New York state comptroller's office. Meanwhile, seven of Wall Street's biggest firms boosted their total compensation and benefits to a combined $122 billion, up 10% since 2006 desipte falling share prices in the company's through which they work! In fact, mortgage-related losses by several of these firms totaled $55 billion and wiped out more than $200 billion in shareholder value. The bonus figures represent the ingrained pay culture on Wall Street that leaves many with little choice to either pay up or lose top talent that can return big bucks in good times... it's a tough choice.

Fannie Mae is a company that experienced some adverse affects from the crash in the residential housing market, losing $1.4 billion in he third quarter alone. Regardless, the largest U.S. mortgage finance company announced its board's approval of President and Chief Executive Daniel Mudd's compensation package for 2007 that amounts to $12.2 million - a raise over his compensation in 2006 of $11.3 million. Shareholders also suffered from a dividend cut of 30 percent along with the sale of $7 billion in additional securites that will dilute ownership over time. Many are wondering how exactly the executive was able to make more in such a troubled environment as it did during the housing bubble of 2006... who knows.

The SEC sent out letters to 350 companies last summer critiquing the way they described the compensation of their top executives. Now, the SEC is reporting that they aren't happy with most of the answers that they received, and they are sending out a second series of letters. In the end, only 26 companies had their cases closed and of those 21 were cided for not giving enough information about the role of individual performance in their pay decisions.

Increasing scrutiny by the SEC could instill changes in how companies calculate compensation, including moving away from individual performance as a measure of success in favor of companywide financial targets such as earnings ro stock prices. The SEC discourages individual performance targets because they are difficult to quantify. It will be interesting to see if the SEC will take a tougher stance the next time around.

Delphi Corporation filed for bankruptcy nearly 27 months ago and unions have been bashing the automaker ever since. The brunt of their concerns were over the company's cash payouts earmarked for executives when it emerged from Chapter 11 bankruptcy. So, when a federal judge said last week that he would OK the bankruptcy plan only if the board agreed to substantially curtail executives' emergence cash payouts, many saw it as a victory for labor unions. The judge ruled that the company was unable to meet their burden and show that the $87 million proposed was a fair and reasonable amount. The executives are now slated to receive only $16.5 million. Many believe that it was the union that is largely responsible for bringing visibility to this issue and forcing the change.

La-Z-Boy Inc. (LZB) has been hit hard by the slump in the housing market and the overall decline in consumer spending. This means that the firm's top 120 managers might not get as much incentive pay since part of their compensation is based on three years of the company's earnings. Now, the board is faced with a decision to either face a mass exodus of talent or change up the company's executive compensation plan to give management another change. It's a difficult situation that will either alienate shareholders or management.

The board determined that the drop in LZB have made its stock awards program unrealistic and would not provide management with incentives during the three year period. So, the board decided to dump its long-term plan in favor of two short-term ones. Now, La-Z-Boy executives can earn 50% of their stock wards based on the company's performance from December 28th to April 26th (just four months!) and the other half in fiscal 2009 beginning in late April. Shareholders argue that changing the rules mid-game defeats the purpose of such programs...

A Watson Wyatt Worldwide poll found that a significant number of U.S. companies do not plan to disclose performance goals for their executive pay programs in their 2008 proxy statements. In fact, only 42 percent of companies plan to disclose the specifics while 31 percent have no plans to reveal goals at all! The SEC instituted the new disclosure rules effective in 2007 in order to provide investors with a clearer picture of executive compensation; however, the rules only request companies provide the information unless it would result in competitive harm.

"Setting sufficiently challenging performance goals and appropriate corporate performance metrics is an extremely important part of the executive pay process," said Ira Kay, global director of executive compensation consulting at Watson Wyatt. "The SEC has put significant pressure on companies to disclose their goals so that shareholders can determine if programs are paying for performance. However, companies are still struggling with the decision of whether to disclose this information."

U.S. Bankruptcy Judge Robert Drain approved Delphis bankruptcy reorganization plan on the condition that it reduce its proposed $88 million cash bonus pool by more than 80%. The company had planned to dish out $87.9 million in cash bonuses, but that amount must now be reduced to just $16.5 million. That number must also include any cash bonuses that are given to people like Chairman Steve Miller, who was to receive an $8.3 million bonus when the company leaves Chapter 11. The move to reduce the compensation comes after complaints from the UAS and International Brotherhood of Electrical Workers. Either way, this is a great win for those fighting excessive executive compensation.

The world of executive compensation works in much the same way that professional baseball works- much of your compensation is based on your peers. Often times, executive compensation begins by taking a look at how much a chief executive's peers are making - that is, in companies in the same industry with a similar size. The compensation committee then forms a plan that incentivizes the executive to perform with stock options and perforance-based bonuses.

Investors can find a breakdown of these figures in the company's proxy statements. New compensation rules are supposed to make things easier than ever for individuals to evaluate executive compensation, but there is still a lot of work to be done. In particular, executives do not have to include long-term stock grants in their total compensation amounts, which can make things slightly misleading when making peer comparisons and other measures.

Many people are upset with executive compensation but in reality there are some bad apples that ruin it for the bunch. Many chief executives are brought into companies in order to help turn them around and they are often worth the price. Others have been with the company for many years and have unparalleled knowledge about the company and are often worth the price as well. It’s the underperforming chief executives that promise turnarounds or others who are installed as part of a family business and shield themselves with poison pills that cause the problems.

There is often insufficient objectivity in many board rooms, but board members do not necessarily approve a lucrative package out of friendship. Rather, they understand how hard and risky the post can be and recommend pay accordingly. There is also a lot of pressure from outside investors these days for performance that can make the chief executive post more difficult than ever before. So, before you criticize the practice as a whole, it may be a good idea to take a look at it from a case by case basis.

Bonuses on Wall Street are healthier than ever despite a horrible year for almost all players in the financial industry. All the numbers are now out and bonuses in 2007 totalled $39.34 billion - up 8.7% from $36.19 billion in 2006. Only Merrill Lynch and Bear Stearns are the only two banks that saw their bonsues fall while the rest rose substantially. Now, some of this can be traced back to an increase in headcount at many brokerages, and if you take out the profitable Goldman Sachs then the number drops to just 3.5%. Are these bonuses justified? With record losses, you'd think it'd be hard to do so!

The Shareholders Association for Research and Education (SHARE) released its 2007 Key Proxy Vote Survey today showing growing support among investment management firms for selected shareholder proposals that address excessive executive compensation. However, success was mixed at best. Firms like Manulife FInancial passed a limit to supplemental executive retirement plans while firms like Nortel Networks failed to pass resolutions despite strong shareholder support.

"Executive compensation was the big issue last year," said Executive Director Peter Chapman. "Continuing shareholder efforts to tie executive compensation to performance and concern about 'pay for failure' helped drive a number of resolutions aimed at curbing excessive executive pay packages for executives. Our survey showed strong support for these proposals."

The Tyson Foods Inc. (NYSE: TSN) board of directors may find themselves in trouble after Proxy Governance Inc. recommended that shareholders withhold their support for the board in light of excessive compensation amid operational underperformance. Tyson underperformed its peers and failed to take action to respond to industry challenges like increased feed costs and beef export restrictions. Meanwhile, the approved pay for CEO Richard Bond amounting to $24.6 million - 82% more than CEOs of other companies in the peer group! Is this pay out of touch with reality? Well, maybe just a little bit...

House Oversight and Government Reform Chairman Henry Waxman wants to question three current and former CEOs of companies involved in the subprime mortgage crisis abou ttheir own multi-million pay packages in a hearing next month. Letters have been sent out to Countrywide CEO Angelo Mozilo, Citigroup CEO Charles Prince, and Merrill Lynch CEO Stanley O'Neal asking them why they "stand to collect tens of millions of dollars in severence payment and other compensation" even as their current or former companies are losing billions of dollars in the mortgage meltdown. Amazingly, CEOs like O'Neal managed to walk away with accumulated benefits worth more than $161 million while their companies are in shambles. Meanwhile, Mozilo received a package worth $110 million on top of $140 million from stock that he sold during 2006 and 2007 - all while Countrywide stock dropped 80%.

Sallie Mae, which has suffered a series of setbacks during the mortgage crisis, has paid top dollar to recruit a new chief financial office last week. John Remondi will receive an annual salary of $1 million along with stock awards that will deliver $2 million for every $1 increase in the company's share price. The CFO could also earn cash bonuses of up to $3 million, two years of housing in Reston, and $100,000 a year for personal use of corporate aircraft. The salary is higher than any other CFO on record and 150% more than his predecessor in 2006. "He must be in the miracle department," commented on compensation analyst.

Countrywide chief executive, Angelo Mozilo, was encouraged by a top U.S. lawmaker today to donate a portion of its $150 million in recent earnings to nonprofit groups that are trying to help subprime mortgage borrowers that were coerced into loans that they simply could not afford.

The solicitation was made by House Financial Services Chairman Barney Frank, who is also known for spearheading investigations into executive compensation and credit card companies. The chairman also noted that the proposed $4 billion acquisition of Countrywide could be a “positive development” in the subprime mortgage crisis.

John F. Young, new chief executive as TXU Corporation, is set to receive a salary of $1 million and could get annual bonuses of up to $2 million this year, according to a filing with the SEC. The executive is also eligible for bonuses up to twice his salary for hitting board-set performance goals. Young will also receive two and a half times his annual salary and bonus target if he is fired without cause or resigns for good reason during the next two years.

Executive compensation has always been a controversial topic at TXU since it was acquired last year in a private buyout by KKR and others. In 2006, CEO John Wilder received compensation valued at $17.12 million in stock awards and was expected to get at least $277 million worth of stock when he left the company. Who said public company CEOs cost a lot of money? It looks like private equity found a cheaper one in this case...

The Securities and Exchange Commission released a new tool aimed at helping people uncover executive compensation values. Many are excited at the new initiative as it is a step toward transparency; however, many others have uncovered problems with the system that suggest it may need some work before it's ready for public use.

The largest problem with the new application is that it only covers 500 companies and there are no plans to expand that number. This is because the commission currently views it as a "demonstration project" and not an "ongoing effort". Another major problem is that it only provides numbers without any added analysis. Many individual investors may not have any benchmark for comparison between many different executives.

One superior option avaible for free online is ExecutiveDisclosure.com. This service enables investors to not only look up compensation information on most public companies, but also compare compensation with stock performance and peer compensation. ExecutiveDisclosure.com is widely considered to be the best option for analyzing executive compensation - and it's free!

AmEx CEO Ken Chenault has created one of the best models for executive compensation to date after the credit markets killed off a lot of his compan's profits. AmEx's board granted the executive 1,375,000 stock options in November and should receive the same number again on January 31st. This is a huge number of shares was justified by the unusually distant time horizon over the next six years requiring that EPS grow at lesat 15% a year on average, revenues must grow at least 10% a year, ROE must average at least 36% per year, and total return to shareholders must beat the S&P500 by at least 2.5% per year. Now that's a plan that shareholders can back!

Jefferies Inc. projected steep fourth quarter losses as a result of surging compensation costs and two principal trading efforts. Top executives, however, agreed not to receive their bonuses as the bank preparesto take losses estimated at $24 million. The chief executive and chairman of the board also agreed to forego stock grants for last year valued at $13 million and $6.5 million, respectively.

The CEO noted: “We have chosen to do this because we believe it is important to compensate competitively our most important assets, our people, and that, if we are asking our shareholders to make this investment for the long-term success of Jefferies, we should put our money where our mouth is and pay our fair share.”

Marvell chief executive, Sehat Sutardja, is set to receive a pay increase and bonuses just one month after the company announced that it was laying off employees. The executive is on track to make $657,000 this year - up $100,000 from last year along with a stock-based bonus and new option grants good for 415,800 shares. As if this wasn't enough, the troubled company also showed four quarters of net losses, a stock price down 27% last year, and an investigation into stock option backdating. Was this new pay deserved? Maybe shareholders will demand a say next time!

The CFA Institute sent a letter to the SEC last month suggesting changes to the way proxy votes on executive compensation are handled. The letter expressed disappointment in the regulations and suggested several specific changes:

• Ending “the use of endless and complex legal boiler-plate, and the avoidance of full disclosure by inappropriate claims that compensation metrics are proprietary” to improve the quality and clarity of compensation reports.
• Ending a practice that allows companies to avoid the “full disclosure of their [executive’s] use of company assets such as aircraft and homes, or the awarding of other personal services or products to these senior executives through a perquisites “allowance.’ These executives are then permitted to purchase whatever services they wish.”
• “Strictly limit the ability of companies to use ‘competitive considerations’ as a reason to avoid disclosure of compensation strategy”
• Requiring companies to”disclose the names of specific competitors used by the company to create a benchmark for determining executive compensation” and be required to provide “graphic comparisons” of its performance against its peers.

It will be interesting to see if the SEC takes any of these suggestions to heart, but given the organizations 92,000 members it should at least have some impact...

A new analysis of escalating CEO compensation compiled by the Canadian Centre for Policy Alternatives found that the average of the 100 highest-paid Canadian chief executives working for a publicly traded company earned $8,528,000 compared to the average salary of just $38,998 for people who are not CEOs. In fact, Canada's top CEOs now make 218 times as much as the average full-time worker, compared to only 104 times as much 1998. It appears that America isn't the only country with the problem!

"It appears to have had something to do with the fact that the market for chief executive officers became significantly an international market in the 1990s and the salary levels in the U.S. tended to slip over (into Canada)," said one of the report's authors. "All it takes is one or two Canadian companies doing really well after hiring a high-profile American chief executive officer and others start to do it, and that tends to drive up the general level of CEO salaries."