MBIA Inc., primarily a bond insurer, announced earlier this week that its board adopted a new shareholder voting policy for senior executive pay decisions.

From Forbes.com:

Shareholders will be able to vote on whether they approve of the compensation for the company's CEO - currently Jay Brown. The vote will be considered by the board's compensation committee in determining the CEO's compensation for subsequent periods.

Shareholders will also take an advisory vote on annual compensation awarded to senior executives as a whole.

Shareholders will be afforded the right to a third vote for any one-time compensation awards given to the CEO or other senior executive offices. Those votes on one-time awards will be binding.

From the USA Today:

The profit at SunTrust Banks last year was half of what it was in 2007. The stock price was also cut in half, but the company's board of directors approved a 75% increase in the 2008 total compensation of CEO James Wells to $8.1 million, according to the SunTrust proxy filed late Monday with the Securities and Exchange Commission.

Even better, though SunTrust is in much better shape than many other banks, it has also received some bailout money.

A company spokesperson responded by saying that the company's proxy statement overstates the value of Wells' compensation because of the vast drop since then in SunTrust's stock price - which is true but doesn't explain the 7.7% increase in Wells' cash salary in 2008.

Whether you love or hate the structure of America's tax code, the simple fact is it often benefits already handsomely paid executives relative to normal 9-to-5 employees.

As the Christian Science Monitor reports:

The current top tax rate on "ordinary" work income sits at 35 percent. But dividends and capital gains from the buying and selling of most assets face only a 15 percent top rate. That's why in 2006, America's top 400 paid just 17.2 percent of their $263 million average incomes in federal tax.

Millions of middle-class American families, once you tally income and payroll taxes, pay far more of their incomes in tax. One particularly striking example from billionaire investor Warren Buffett: In 2006, he paid 17.7 percent of his income in total taxes. His secretary, who made $60,000, paid 30 percent of hers.

When an executive receives outrageous, undeserved stock compensation, they not only take advantage of their shareholders but often times they also take advantage of every normal taxpayer too.

(It is important to note that not all stock options, for instance, skirt normal income tax rates. Nonqualified stock options require the exerciser to claim the difference between the strike price and the market price as income.)

The Associated Press is reporting that General Electric's CEO and Chairman Jeffrey Immelt declined his "long-term performance award," valued at $11.7 million, for 2008.

Given that GE shares have lost nearly 70% of their value over the last 12 months, Immelt is right to forgo his bonus - but the real question is why he is even eligible for a bonus?

I am not suggesting companies should be held hostage by stock market price swings - but GE is facing a real crisis not simply a downturn in its business cycle.

Bloomberg is reporting that "Citigroup Inc. Chief Executive Officer Vikram Pandit said, [while testifying before the U.S. House Financial Services Committee], he will take a salary of $1 and no bonus until the bank, which has accepted $45 billion in government bailout money, returns to profitability."

From BusinessWeek:

In recent weeks, the news from Japan Inc. has been a steady drumbeat of layoffs, plant shutdowns, and gloomy earnings forecasts. Yet few CEOs have been shown the door. And there are scant signs that the public and political outcry against CEOs' fat pay packages in the U.S. will be echoed in Japan.

That's because most Japanese chief executives don't earn anywhere near the big paychecks of their Western counterparts. CEOs at Japan's top 100 companies by market capitalization earned an average of around $1.5 million, compared with $13.3 million for American CEOs and $6.6 million for European chief execs at companies with revenues of higher than $10 billion...

Not that Japan's lower executive pay necessarily means the country has a better overall compensation climate. As the article goes on to note, Japanese company boards are generally dominated by insiders with very long tenure while Japanese filing regulations do not require that executive pay be broken down by individual.

Nonetheless, it is somewhat refreshing to see pay that does not seem to assume the CEO has super-human powers.

From the blog of Bob Sutton, a reminder that Board Members not only make a good deal of money but also don't hesitate to spend it (often by paying the CEO more money):

After controlling for traditional size and performance measures, the amount of money made outside directors, especially those on the compensation committee, had a huge effect on CEO pay.  O'Reilly and his colleagues report that for every $100,000 that the average member of the compensation committee is paid, the CEO's pay goes up another $51,000 per year.  Remember, these effects are independent of firm performance and size!

Former CEO of HP Carly Fiorina (who walked away with $20 million in severance when she was effectively forced out of the company) argues that government shouldn't decide CEO pay. I largely agree with her arguments about the $500,000 cash pay cap and suggestions for what it should be replaced with:

[The pay cap is] arbitrary: Why not $400,000 or $600,000? It's incomplete. It only applies to institutions that will receive more government assistance going forward.

So what's the answer? To strengthen transparency, all aspects of CEO pay and perks should be fully disclosed on a regular basis. This should include airplanes, cars, golf-club memberships, bonuses, stock options, retirement plans and salaries -- in short everything that a common-sense person would consider part of a CEO reward package.

To strengthen accountability, all aspects of CEO compensation should be voted on by shareholders on an annual basis.

Ultimately, it is the owners of a company who must determine whether a CEO's rewards are justified by a CEO's performance. And because the American taxpayer is now a partial owner in many companies, the government can get a vote as well -- in some cases a very sizeable vote.

In addition, "clawback provisions," which require a CEO to return compensation to shareholders if promised results aren't delivered, should be standard fare.

Finally, when a company comes to Washington for American taxpayer money, it is an admission that mistakes have been made and major bets have failed. These CEOs should be prepared to tender their resignations and those of their boards. To earn a bailout, a CEO and board should be held accountable.

Though I don't agree with everything (or close to everything) HuffingtonPost.com publishes, writer Jonathan Tasini helpfully reveals another way the $500,000 limit on cash pay for companies receiving very large amounts of bailout money is a sham - it doesn't include any stipulation about pensions:

...CEO pay isn't really where the big money is. It's in CEO PENSIONS. And the Treasury rules say NOTHING about pension benefits.

When Edward Whitacre, for example, retired as CEO of AT&T in 2007, he received retirement--drumroll, please--$161 million as a pension package---the third highest in U.S. corporate history--not to mention the $1 million-a-year he gets as a consultant to the company. According to The Corporate Library, some other "parting gifts" awaiting other CEOs include the $83 million (probably higher by now) locked in by Kenneth D. Lewis, the CEO of Bank of America Corp., which we learned yesterday spent $14.5 million to influence Congress and received $45 billion to date from the bailout bill.

President Obama is making headlines with his newly imposed limits on executive pay for companies receiving bailout money:

President Barack Obama on Wednesday imposed a salary cap of $500,000 for top executives at companies that receive large amounts of bailout money, saying that some executives were being "rewarded for failure," in part with taxpayer-subsidized money.

This is indeed an improvement over current rules that only restrict the tax-deductibility of executive pay for companies receiving bailout money to $500,000, but don't forget to read the fine print that is not being as well publicized:

Senior executives would be limited to $500,000 in total annual compensation, other than restricted stock. They would be able to cash in such stock only after the government had been repaid.

So, the $500,000 cap does not include stock rewards so long as they are not cashed-out until the government has been repaid and even this $500,000 in-name-only limit applies only to the companies receiving the largest amounts of money, referred to as "exceptional assistance" by the government.

For companies receiving smaller bailouts, the $500,000 compensation limit applies, but it can be waived if they fully disclose compensation terms and adopt a "say on pay" approach.

From Forbes:

Capital One Financial Corp. Chairman and Chief Executive Richard Fairbank won't receive a paycheck until the Treasury Department no longer holds any of the company's preferred stock, according to a regulatory filing Tuesday.

Late last year, Capital One sold $3.55 billion in preferred stock and warrants to the Treasury Department under the government's capital purchase program that pumped $250 billion into the nation's banks.

Under a new compensation plan approved last week, Fairbank will also not be able to sell or otherwise transfer any shares obtained from equity grants until the U.S. Treasury no longer holds any preferred shares in the company or one year after he retires from the company.

Don't feel too bad for Fairbank though - he received options valued at $17 million at the time they were granted in 2007, so he should be able to cover his rent and grocery expenses for the next couple of years.