From Executive Excess 2008:

The U.S. tax code currently is riddled with loopholes that allow top corporate and financial leaders to avoid paying their fair share of taxes. Still other loopholes allow corporations to claim unwarranted deductions for exorbitant executive pay. Ordinary taxpayers wind up picking up the bill. That’s why this report defines such loopholes as “subsidies for executive excess.”

Estimated Annual Cost to Taxpayers of the Five Most Direct Tax Subsidies for Excessive Executive Pay

1. Preferential capital gains treatment of carried interest $2,661,000,000
2. Unlimited deferred compensation $80,600,000
3. Offshore deferred compensation $2,086,000,000
4. Unlimited tax deductibility of executive pay $5,249,475,000
5. Stock option accounting double standard $10,000,000,000

Total $20,077,075,000

Executive Excess 2008 also looks at the pay of fund managers - which is usually ignored in general discussions of rising pay because such managers are not heads of publicly traded companies so many arguments levied against them do not apply. However, through the lens of beneficial tax treatment, fund managers may be more, not less, guilty. Here are the top 5 fund managers by pay in 2007 (no, these billion dollar numbers are not typos):

As promised, the beginning of an extensive look at the Institute for Policy Studies and United for a Fair Economy's 15th annual CEO Compensation Survey, this year titled "Executive Excess 2008: How Average Taxpayers Subsidize Runaway Pay."

Key Findings

CEO-WORKER DIVIDE: S&P 500 CEOs last year averaged $10.5 million, 344 times the pay of typical American workers. Last year, the top 50 hedge and private equity fund managers averaged $588 million each, more than 19,000 times as much as typical U.S. workers earned.

TAXPAYER SUBSIDIES FOR EXECUTIVE PAY: Average U.S. taxpayers subsidize excessive executive compensation — by more than $20 billion per year — via a variety of tax and accounting loopholes.

INDIRECT TAXPAYER SUPPORT FOR RUNAWAY PAY: More than 85 percent of the public companies on the federal government’s top 100 contractors list paid their CEOs over 100 times the pay of average U.S. workers.

REFORM ROADBLOCKS: Legislation that would plug executive-friendly tax loopholes is already pending in Congress. But this legislation has stalled — and will likely remain stalled unless the November 2008 elections change current Congressional voting dynamics.

The Christian Science Monitor takes a broad look at the executive compensation issue:

How much?

Some 77 percent of Americans polled last year felt that corporate executives "earn too much." Most corporate boards apparently disagree. Last year, although the nation's economy was already in trouble, they gave the chief executive officers of the Standard & Poor's 500 largest companies on average a 2.6 percent pay hike to $10,544,470.

Why no action?

On the presidential campaign trail, both Sens. Barack Obama and John McCain attack the high levels of pay for corporate bosses, but are mostly fuzzy on remedies. Several bills before Congress would attempt to tame runaway executive pay. But none have passed both houses.

Politicians are "looking out" to protect the campaign contributions they receive from corporate executives, says Ms. Anderson. And it's an election year.

Are they worth the money?

A new study by economists Ulrike Malmendier at the University of California, Berkeley, and Geoffrey Tate at the UCLA Anderson School of Management, Los Angeles, cast some doubt for some "CEO superstars." After gaining fame and prestigious awards from business magazines and others for their corporate performance, they are rewarded with even more pay. But in the next three years their firms underperform by 15 to 20 percent compared with firms of non-prize-winning executives.

Ms. Malmendier suspects the CEOs are too busy writing books, sitting on other company boards, taking prestigious public service jobs, and improving their golf handicaps.

From the Associated Press:

Oracle Corp. (NASDAQ: ORCL) founder Larry Ellison, a longtime fixture on the list of the world's richest people, is now ensconced atop The Associated Press' rankings of the top-paid chief executives in the United States.

Never shy about flaunting his estimated $25 billion fortune, Ellison established himself as the best-paid CEO among major U.S. companies by persuading Oracle to award him a fiscal 2008 pay package valued at $84.6 million under the AP's calculations.

Though buyouts can be good for shareholders, the International Herald Tribune shows that the real benefits often go to executives:

August Busch IV, chief executive of Anheuser-Busch Cos. Inc. will be paid nearly $10.4 million after the brewer is sold to InBev SA and $120,000 a month to consult for the new company through the end of 2013.

Terms of the consulting deal are currently being negotiated, according to a filing with the Securities and Exchange Commission made Friday.

Busch, a member of the St. Louis-based brewer's founding family, will also be eligible for an additional payment of $13.3 million on various change in control payments and benefits, the filing said.

UnitedHealth Group Inc. (NYSE: UNH) became one of the most prominent players in an options backdating scandal where award dates were altered  to make them more profitable for executives.

In December, former UnitedHealth CEO William McGuire agreed to give-up a staggering $420 million in addition to $200 million he had already returned.

Now, according to the WSJ:

The Minnesota Supreme Court on Thursday said a federal judge has little leeway to review or reject a stock-options backdating settlement between UnitedHealth and former Chief Executive William McGuire, increasing the likelihood that the deal will be approved.

In a rare major media story, the Associated Press does a straight CEO pay piece rather than a general look at the climate of executive compensation:

Stephen Sanger got a nearly 14 percent raise in his final year as the chairman and chief executive of General Mills Inc. (NYSE: GIS), according to a filing with the Securities and Exchange Commission.

Sanger, who retired as head of the company that makes Wheaties and Cheerios cereals at the end of its fiscal 2008 year in May, earned $13.8 million, the filing said. That compared to earnings of $12.1 million in the previous year.

Sanger's base salary was nearly $1.3 million, and he also was given $3.5 million in non-equity incentive plan compensation for meeting financial targets, the regulatory filing said.

In addition, Sanger was given miscellaneous compensation of $470,701. This included company contributions to savings plans as well as perks valued at $192,184; those included $50,567 for personal air travel, $16,806 for use of the executive car and $40,200 in discounts when he bought the car. He was also given $15,054 for financial planning, $32,772 for insurance and $17,298 for unused vacation days.

The bulk of his compensation for the fiscal year was in stock and option awards valued at more than $8.5 million when they were granted in June 2007.

On August 18th The Institute for Policy Studies and United for a Fair Economy will release their annual report on CEO pay - this year highlighting how the tax and accounting systems favor high paying positions through:

• Preferential capital gains treatment of carried interest
• Unlimited deferred pay
• Offshore deferred compensation
• Unlimited deductibility of executive compensation
• Stock option accounting double standard

Expect in-depth coverage here when the report is released.

From The Motley Fool's always attentive writers:

Starbucks (NDAQ: SBUX) provided the latest example of how walking out the door can actually be very lucrative for corporations' top brass.

It's no news that Starbucks is cutting costs. Its plans include layoffs and some store closures. Somehow, I doubt that baristas will receive the kind of sweet deal former Starbucks Coffee International President James Alling is getting as part of his "separation agreement." Alling will receive a lump-sum payment equal to an entire year's salary; last year, his base salary was $600,000.

Alling will also take home the equivalent of the cost of health-care coverage for one year.

The Chicago Tribune has an interesting, even if unconvincing, piece that suggests stock based compensation resulting from shareholder pressure led to GM's unstable financial condition:

First, a bit of history. Wall Street and institutional investors' pension funds, mutual funds and trusts began insisting in the 1990s that companies return more cash to shareholders. They claimed that managers were squandering resources on lavish perks and misguided acquisitions.

In the early years of the revolution, managers of U.S. corporations occasionally said no to investor demands. A couple of things got rid of that behavior. First, CEOs who bucked shareholders sometimes found themselves out of a job. Second, executive share ownership and stock options became the coin of the realm. Eventually they comprised the bulk of CEO pay. And now, CEOs wanted the same thing as owners: high returns to owning stock.

And now back to GM (NYSE: GM). Because of its size, the company was ground central for a shareholder revolution. Robert Stempel, chief executive officer, lost his job in 1992 due to pressure from institutional investors. Subsequently, the company raised the percentage of executive compensation based on stock ownership and stock options.

What happened to payout ratios? From 1996 to 2000, GM delivered more than $20 billion to shareholders: $13 billion in multiple repurchases and an additional $7 billion in dividends.

It's impossible to say where GM would be today had it spent some of that $20 billion on research and development and a rainy-day pension fund. But surely it would be a far better place than here.

From Forbes:

After clocking a juicy 38% collective pay increase in 2006, CEOs of the 500 largest companies in the U.S.--as measured by a composite ranking of sales, profits, assets and market value--saw their compensation dwindle an average 15% in 2007. (Chalk up much of that volatility to performance-based compensation packages tied to flagging earnings and share prices.) Meanwhile, [the 13 female CEOs out of the group of 500] saw their pay jump an average 27%.

Not that the pay gap between male and (the few) female CEOs doesn't persist. The average take, including salary and bonuses, for all 500 CEOs was $12.8 million--double the female average of $6.5 million.

From Financial Week:

CEOs who are hired externally cost more than those promoted from within.

In fact, chief executives hired externally made far more than their counterparts with at least two years’ tenure as CEO, according to an analysis conducted by executive compensation research firm Equilar. At small-cap firms, externally hired CEOs received a median pay package that was 79.8% higher than that of tenured CEOs. Large-cap companies paid external hires 51.1% more and midcap companies paid 10.2% more.

“Companies pay the premium because most people coming in from the outside are stepping into a bad situation,” [Equilar research manager Alexander Cwirko-Godycki] added. “Making the move [to CEO] is less risky for the executive from within because he already knows the company and may know the board well.”

From the USA TODAY:

JetBlue CEO Dave Barger will take a 50% pay cut for the second half of 2008, something Reuters calls "a show of solidarity with employees as the low-cost carrier struggles with soaring fuel prices and a slowing U.S. economy." Barger's base salary is $500,000 a year, presumably meaning that a 50% cut applied to the second half of the year will shave $125,000 from his salary. JetBlue disclosed the pay cut in a federal filing Monday, saying that Barger is making the move "in recognition of the challenges faced by the Company and its employees in the current industry environment."

From Canada's The Globe and Mail:

Now with hundreds of billions of dollars of stock market value wiped out, pressure is mounting to overhaul an executive compensation system that critics blame for drawing banks into high-risk mortgage investments, with few consequences for the CEOs who steered them there.

"Wall Street, by its nature is high risk and high pay," said David Larcker, an accounting professor and compensation expert at Stanford University in Palo Alto, Calif.

"But what happens when the risk goes the other way. Should pay also be adjusted?"

During the mortgage boom, there was a "weird incentive" to take on risk, and top banking executives made "tremendous sums," Prof. Larcker pointed out.

"That's how this mess got made."

From the Portland Business Journal, Jim Verdonik takes a lighthearted look at executive compensation:

So, where does this leave executive compensation reform?

1. No law prohibits paying CEOs very, very, very large amounts of money, even if people don't like the idea.

2. The primary penalty for big compensation packages is public shame and embarrassment. The U.S. Securities and Exchange Commission requires compensation disclosure in proxy statements. Newspapers publicize the disclosures. The public moans about greedy CEOs: "What pigs!"

3. "Vote the rascals out!" a traditional cry in American politics, is heard frequently from shareholder activists. The problems with voting the rascals out of the boardroom are similar to the political problems.

First, it's difficult. Voting rules favor incumbents in both political and corporate elections.

Second, new rascals often replace old rascals.

4. Finally, there is the threat of civil liability for directors who approve large compensation packages. This threat has only a modest effect on CEO compensation. Under the business judgment rule, directors aren't liable for making mistakes if they act reasonably in the way they make decisions. Companies that invest time, money and effort in presenting appropriate information to directors, hiring experts and otherwise documenting the compensation process can protect their directors from liability in all but the most outrageous situations.

The Washington Post notes that "Perks Still in Play But Sometimes Are Less Lavish:"

Financial services companies were largely rolling back executive fringe benefits in 2007. But that doesn't mean they were insignificant.

For example, before leaving with a cash severance payment of $3.2 million, Sallie Mae chief executive Thomas J. Fitzpatrick received medical, housing and auto benefits of almost $30,000 last year. Fannie Mae chief executive Daniel H. Mudd got almost $150,000 in fringe benefits, 90 percent related to life and liability insurance coverage and matches for charitable contributions in 2007. His other perks included financial counseling services, an executive health program and dining services.

It's not just executives who eat and travel on the company dime. Often, their spouses do, too.

Freddie Mac, for instance, pays business-related travel and dining expenses for the spouses of top executives.

Negotiating a new chief executive contract is no cheap exercise. Freddie Mac paid $100,000 in legal fees for chairman and chief executive Richard F. Syron to renegotiate his contract last year. He got an 18 percent raise and a $1.25 million extension bonus.

It's common for companies to foot the legal bill for executives during employment negotiations. "Many companies agree that the executives should be represented legally, and as a result they should be willing to pay for counsel for the executive," Hall said. "It's kind of like loading the gun against yourself."