The always attentive The Motley Fool catches this almost unbelievable happening, but given the current state of executive compensation can anything really shock any more?

"Imagine this: You quit your job because you landed a great new gig. To prove there are no hard feelings, your soon-to-be past employer gives you your entirely yearly salary and a few added perks to boot. Sound like a pipe dream? Not at Abercrombie & Fitch (NYSE: ANF), apparently.

Abercrombie & Fitch's Chief Financial Officer Michael Kramer is leaving the company to become CEO of privately held Kellwood. On a related Form 8-K filing, I noticed that Kramer will be paid the equivalent of 12 months of base salary, a whopping $775,000. He will receive earned incentive compensation as of July 21, and accelerated vesting of some outstanding stock awards, along with the continuation of some health-care benefits."

The Detroit Free Press carried a novel, even if slightly unconvincing, article tracing the strange saga of Detroit Mayor Kwame Kilpatrick, who is facing perjury charges and is currently out of jail on bail yet still refuses to resign his office, to the rise of the American CEO:

Blame it on our infatuation with the cult of the charismatic CEO and ultimately on the infatuation of the charismatic CEO with himself.

Iacocca, the glib automotive icon who led Chrysler Corp. through two near-bankruptcies, and Welch, legendary boss of General Electric from 1981-2001, were the first rock-star CEOs. Then Microsoft's Bill Gates and Apple's Steve Jobs ushered in the digital age.

So taken was the American public by these superstars of business that people started asking, "Why can't we run government like we run our private-sector businesses?"

[In 2002], a book was published titled "Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs" by Rakesh Kurana.

Kurana traced the rise of the American CEO from anonymity to superstar in the last two decades of the 20th Century.

"Previously, CEOs were about as well-known as their chauffeurs," he wrote. "But something happened when Lee Iacocca was credited with single-handedly saving an American icon. Most people forgot about the $2-billion federally guaranteed loan to bail out Chrysler, or the United Auto Workers' givebacks. Iacocca made other CEOs look bland -- there was even talk of drafting him for president.

"The image of a CEO changed from being a capable administrator to a leader -- a motivating, flamboyant leader with a new task. In the late 1980s and early '90s, business tried to redefine itself; it was no longer about the profane task of making money, but concerned with vision, values, mission -- essentially religious terms."

A balanced and well-researched look at the actual ramifications of excessive executive compensation by Awie HW Foong and Mak Yuen Teen of AsiaOne Busines:

[By] compensating millions of dollars to a CEO who has failed to perform, and at the same time laying off the employees en masse, these companies are effectively sending a negative signal about organisational fairness.

The ramification of perceived unfairness is likely to be a long term one. Past studies have shown that the feelings of unfairness would lead to poor employee loyalty and engagement, and consequently poor work performance.

Based on data from the Watson Wyatt's employee opinion surveys in 2004 and 2007, we found that it is the employees' perception of the fairness of the reward system, not how satisfied they are with the rewards, that has the stronger effect on their loyalty to the organisation. The findings suggest that employees want to be treated fairly. That includes a salary and reward package that is equitable to the industry norms as well as a fair process in determining those rewards. Employees also expect that the performance and reward management process is consistent and clearly communicated to them. The study also found that employees who believe that they are being treated fairly are in turn more willing to stay with the company and to make sacrifices for the company during difficult times...

[Also], a recent study by Charles O'Reilly, the Frank E Buck Professor of Human Resources Management at the Stanford Graduate School of Business, together with James Wade of Rutgers University and Timothy Pollock of Pennsylvania State University found that the effects of unfair executive compensation flow down to lower level managers and employees. Managers who perceive that the CEO is unfairly paid are more likely to leave the company.

Proxy Governance, a firm that issues recommendations to large institutional investors on how to vote on proxy matters, has come to a much needed conclusion in the Yahoo! Inc. (NASDAQ: YHOO)-Carl Icahn saga: make some noise about Yahoo executive's unjustified paydays.

In the wake of the much publicized truce between billionaire troublemaker Carl Icahn and Yahoo, the proxy vote over the fate of the board has lost its steam - but Proxy Governance thinks the vote need not go to waste.

"The average three-year compensation paid to the named executives is 480 percent above the median paid to executives at peer companies. In light of Yahoo's relatively weak financial performance, we therefore recommend that shareholders withhold votes from the members of the compensation committee."

The members of the compensation committee, Roy Bostock, Ron Burkle and Arthur Kern, aren't likely to be voted out - but hopefully they'll get the message.

South Africa's Financial Mail looks at the gap between executive and worker pay (note that the figures presented are in South Africa Rand, which currently exchanges for 0.132 U.S. Dollars):

SA's wealthiest and lowest salary earners continues to widen. Figures released by the presidency last week showed that earnings of the average SA worker grew by only 4%/year over the past five years. This contrasts with research by the FM showing that 171 executive directors of the top 40 JSE-listed firms took home R2,7bn last year - nearly R16m each.

The pay gap has become a target of trade unions, which are increasingly citing high executive pay to justify above-inflation-rate demands for salary hikes.

Perhaps a better measure is the amount paid to directors as a percentage of the company's average pre tax profits over the past three years.

For shareholders, anomalies can be seen in companies like Uranium One, which made an average profit of only R18m over the past three years, yet its directors made R76m last year, including a R52m gain from options.

But is it a zero-sum game? Does CEO pay have to drop to narrow the difference? Mark Bussin, chairman of 21st Century Pay Solutions, says there is no proven link between higher levels of executive pay and lower levels of worker pay. " The view might be that you're robbing Peter to pay Paul, but executive pay is still rising faster than the lower levels in countries that are far more equal than SA," he says.

Ultimately, Bussin says, this becomes a moral discussion. "Is it right to pay someone R5m/year and another person R50 000 when they both buy the same food and fuel? " he asks.

In the wake of last month's WSJ article, Human Resource Executive Online takes another look at lavish death benefits for CEOs, also known as "golden coffins:"

Mel Fugate, an assistant professor of management and organizations at Southern Methodist University in Dallas, says golden coffins are yet another symptom of outrageous executive pay that's been tolerated for far too long by shareholders.

"Activist shareholders have been bringing resolutions asking for the right to vote on executive-compensation packages, and they've been voted down in almost every instance," he says, adding that a resolution was easily defeated at ExxonMobil's most recent shareholders meeting.

"In most cases," he says, "the majority of shareholders are large institutional investors and folks who are in bed with one another. They're not interested in change."

Golden coffins have also been pushed by compensation consultants, who are, in many cases, brought in to justify excessive compensation packages, says Fugate.

"They impress upon the board the need to 'stay competitive' with a list of 'comparable firms' by offering these perks," he says. "It's all about keeping up with the Joneses. And no one says, 'No.' "

From Seeking Alpha's Richard Shaw:

Executive compensation is a difficult issue.  Although we grant that the challenge in designing a reasonable system that works in all seasons is daunting, in the net we come down on the side that the compensation is too often too great.

We believe that the incentives are not adequately designed by objective third-parties  — highly compensated directors who like their pay and serve at the pleasure of the CEO are not objective third parties.

Now with the moral hazard element associated with government rescue of financial institutions, the possibility of truly unjust enrichment of banking executives looms large.

Many bank executives received large salaries and large bonuses for the growth and illusory short-term profits associated with mortgage lending and mortgage securitization that landed us in the current mess.

Some lost their jobs as a result of massive losses of shareholder equity, while being shoved out the door with huge sums of severance pay.

Now we face the issue of executive stock options issued recently during this period of deeply depressed bank stock prices.  Will they balloon into great riches for executives who happen to be at the helm when the Fed, the Treasury, the Congress and ultimately the tax payers bail-out the banking system?

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.

Wachovia Corp. (NYSE: WB) announced in a regulatory filing that new CEO Robert Steel will be paid handsomely to help turnaround the bank – possibly as much as $38 million.

The former Goldman Sachs Group (NYSE: GS) employee who most recently served in the Treasury Department has an annual salary of $1.1 million, bonus incentive up to $12 million, a separate long-term bonus award of $15 million, plus a restricted stock-grant of $10 million to be issued on July 15.

In a provocative article from Associated Press writer Rachel Beck, she argues that Wall Street CEOs should return some or all of their huge paydays that occurred as America was led into the current financial crisis:

If Wall Street CEOs really want to revive their credibility, they should return the bloated bonuses they got when they made what eventually turned into wrongheaded bets on the mortgage market.

We all know how that outsized risk-taking ultimately backfired for their firms. Record profits have turned into massive losses as financial companies worldwide have taken some $250 billion in write-downs due to their free-falling credit-related assets.

Yet the CEOs still are clinging to the compensation they made from busted business models. And not just bonuses from 2008, when the subprime mortgage meltdown and the credit crisis became more acute, but also those from the last few years that were "earned" when profits were soaring.

That's what they should be giving back to shareholders. It would be a genius public relations move.

Jack Welch, in a column co-authored with his wife Suzy for The Times of South Africa, unsurprisingly defended executive compensation being set by the free market. In case you don’t remember, Jack Welch is the former CEO of General Electric Co. (NYSE: GE) who was paid handsomely for his work, including a package for his retirement of (as quoted in yesterday’s post):

An annual retainer of $86,000 and perks that included sports tickets, use of company aircraft and an $11 million Manhattan apartment, bodyguards and other things that the U.S. Securities and Exchange Commission later valued at about $2.5 million annually. 

In the column, Welch argues:

We think the debate over executive compensation is exactly as it appears — a philosophical divide. There are those who believe that many CEOs just make too much money compared with average workers and their relative value to the organisation, and that someone — be it the shareholders themselves or government regulators — must close that gap. Outsized CEO compensation, this group generally believes, is bad for society and morally wrong. Then, there are people who generally don’t say what they believe, because it’s so politically incorrect. But allow us to step in, because we share their view. Yes, most CEOs make a ton of money, and sometimes they make too much. But in the market economy, salaries are set by supply and demand. The companies that field the best teams win and, because of global competition, the best teams tend to be expensive.

Albany’s Times Union writer Marlene Kennedy decries Grasso’s victory last week – not on legal merits or out of a sense of outrage, but because it “denies us a rich spectacle:”

I had been looking forward to daily, nonstop TV coverage of the trial -- think O.J. Simpson, but for the Wall Street set [of the late 90’s]…

You remember the period: The bull market was beginning to roar and the titans of industry were amassing hefty compensation packages. Jack Welch left General Electric Co. (NYSE: GE) in 2002 with an annual retainer of $86,000 and, it turned out, perks that included sports tickets, use of company aircraft and an $11 million Manhattan apartment, bodyguards and other things that the U.S. Securities and Exchange Commission later valued at about $2.5 million annually.

The disclosures mightily embarrassed the company, and Welch subsequently gave back much of the package.

There were the shenanigans of former Tyco (NYSE: TYC) chief Dennis Kozlowski (of the $6,000 shower curtain fame) and HealthSouth's Richard Scrushy (found guilty of bribing the governor of Alabama) and WorldCom's Bernard Ebbers (accounting fraud and conspiracy), and the late Kenneth Lay of Enron (deceiving company employees and shareholders).

In a thoughtful though not necessarily convincing piece from The Motley Fool, Dick Grasso's pay while at the NYSE is defended based on the length of his tenure and the success of the exchange during his leadership (as well as other, more obscene pay packages):

If you've worked at the world's largest and best-known stock exchange for 35 years -- during eight of which you were the CEO, including after 9/11, when you provided unparalleled leadership -- you think you'd be entitled to end your tenure nicely compensated for a job well done.

Here's what's important in Grasso's case:

• The NYSE was a private organization when the dispute arose.
• Grasso had been CEO for eight years before he left, during which time the NYSE earned more than $900 million.

Heck, if Grasso ran a hedge fund, he'd practically be eligible for food stamps [given his paltry $190 million payday]. His retirement package is equivalent to what hedge-fund manger John Paulson made every two and a half weeks last year. Grasso worked hard. He benefited the company. He deserves his pay.

After four of the six charges against former NYSE Chairman Dick Grasso were thrown-out by the New York Supreme Court, yesterday the remaining two were also dismissed by an appeals court.

As The Washington Post reports, "New York Attorney General Andrew M. Cuomo yesterday dropped his case challenging the nearly $190 million compensation package of former New York Stock Exchange chairman Dick Grasso, hours after a state appeals court dismissed the two remaining claims.

Cuomo's decision not to proceed marked the end of a high-profile attempt by state regulators to reel in big-ticket executive payouts. Grasso's compensation, which included an immediate lump-sum payment of $139.5 million in 2003 and an additional $48 million payable over four years was challenged by state prosecutors as excessive and in violation of state law."

The nation's most popular newspaper by circulation, The USA TODAY, features an article on the highly charged political environment in Europe surrounding excessive, American-style CEO pay:

Luxembourg Prime Minister Jean-Claude Juncker, who chairs meetings of eurozone finance ministers, has called rising corporate pay a "social scourge" and wants higher taxes on what he calls "golden goodbyes." Fifteen nations use the euro as their currency.

French President Nicolas Sarkozy is urging debate on European-wide pay limits when France takes over the European Union's rotating executive presidency Tuesday.

Behind the threats is growing public and shareholder ire with multimillion-dollar compensation packages that are starting to rival American CEO pay at the same time European economies and financial markets are sagging.

CEOs in Europe have traditionally earned less than their U.S. counterparts, says Vicente Cuñat, who analyzes CEO compensation at the London School of Economics. But in the past 15 years, he says, "Europe is catching up."

As in the USA, Guay says, CEO pay becomes a hot-button issue when the economy isn't doing well. It cools when times get better. Over time, he says, public outcries have rarely had a big effect on either side of the Atlantic. "It really hasn't altered the path of pay over the last 15 years," Guay says. "We still see pay rising. I think it will continue."