")) took with them when they were pushed out the door at their respective firms. While these are certainly egregious examples of "compensation gone wild," the defenders of existing pay packages for top executives can't ignore the fact that the average CEO in the S&P 500 in 2005 earned 350 times more than the average worker. Sure, this is down from about 500-to-1 at the beginning of the decade, but much of that deflation was due to poor stock market performance (which impacted the value of stock and option awards) rather than some overriding effort by corporate boards to rein in excessive pay packages."

" While many of these abuses of shareholder capital could have been uncovered by digging through the multitude of regulatory filings and news stories surrounding the firms and their executives, there was always a lack of complete transparency behind the numbers (especially with regard to the impact that severance or change-in-control provisions could have on a company if they were actually exercised). As such, we're grateful to see that the SEC has made a concerted effort to force companies to provide investors with much more detailed information about top executives' total compensation, as well as the philosophy and objectives underlying compensation decisions. The SEC started to get serious about disclosure about four years ago, and the revised rules for executive compensation and related-party disclosure that took effect this year represent the culmination of these efforts."

"The overarching goal of the SEC was to provide investors with a "clearer, better-organized, and more complete picture of compensation for principal executive officers, principal financial officers, and the highest paid executive officers and directors." As such, the new rules require the disclosure of all elements of executive compensation: salary, bonuses, stock and option awards, incentive-plan payments, changes in pension values and deferred-compensation earnings, and all other forms of compensation (including perquisites and potential severance and change-of-control payments). The SEC has also required the presentation of "one bottom-line number" that reflects each executive's total compensation--a figure that the commission expects to be "comparable across companies.""

"While we're delighted with the level of disclosure that must now be provided, including a more detailed explanation by compensation committees about the objectives and components of a company's executive pay packages (reported in a new compensation discussion and analysis section, similar to the management discussion and analysis segment of each firm's Form 10-K), we think it may take some time to fully realize the impact that this new level of transparency will have on executive compensation."

"On the one hand, we expect the increased disclosure--especially with regard to things like deferred compensation and termination payouts--to create some eye-popping moments for investors, leading perhaps to greater calls for curbs in executive pay or shareholder votes on executive compensation packages. On the other hand, we think that there are several "unintended consequences" of the new rules that have yet to play out in the marketplace."

"Many of the problems we face today with excessive pay packages for top executives are actually the result of the unforeseen consequences of legislation and regulations that were enacted (or not enacted) in the early 1990s. In an attempt to improve the transparency of executive pay packages (in reaction to what were perceived as excessive levels of compensation during the 1980s), the SEC adopted more stringent disclosure rules in 1992, and also confirmed the right of shareholders to question executive pay practices in annual proxy resolutions. In 1993, Congress decided that companies could no longer take tax deductions on executive compensation in excess of $1 million, unless the pay was performance-based. This coincided with the fight that companies were putting up against the efforts by the Financial Accounting Standards Board to make firms expense the value of stock options they were issuing to their employees. It also didn't help that the tax rate for gains realized from stock options was significantly less than the top tax rate for cash earnings."

"While we believe
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