All you executives in charge of corporate disclosure or investor relations, take heart: The Securities and Exchange Commission feels your pain.

So says Meredith Cross, head of the SEC’s Division of Corporation Finance, who spoke this morning at the National Investor Relations Institute annual conference in San Diego. I’m at the NIRI conference as well to host a panel discussion on social media and investor relations, and will have more on that in a few days. For now, Cross is giving us enough news to start the week.

Foremost, Cross shed more light on what might be contained in the fabled “proxy plumbing project”—a broad review of federal proxy rules that the SEC has touted for several years, without ever showing us so much as a concept release, much less an actual proposal. In theory, this review will haul proxy voting rules into the modern era of shareholder activism, hedge fund trading and online communications. In practice, however, the Commission’s attention keeps getting diverted to small matters like the financial crisis or Madoff-sized Ponzi schemes, and this much-needed review moves that much further toward the horizon.

Cross said today that any substantive SEC proposals might not arrive until 2011, which means no serious reforms until at least 2012. She did promise that it will be “quite sweeping” whenever it does see the light of day, and we can expect it to cover:

• Accuracy in proxy vote tabulation;
• The risks of empty voting and over-voting;
• The distinction between “Objecting Beneficial Owners” and “Non-Objecting Beneficial Owners,” including whether the OBO/NOBO difference should continue;
• The role of proxy advisory firms; and
• Communication among shareholders.

None of those points are particularly surprising. But one telling moment came when Cross was asked about the OBO/NOBO distinction, a rule that prevents companies from knowing who many of their shareholders actually are. Investor relations officers regularly complain that OBO/NOBO thwarts their efforts to foster good communication with shareholders, and Cross admitted, “Our current rules aren’t making that any easier.” I take that as a hint that perhaps the days of the OBO/NOBO distinction are numbered.

Of course, we still need to see an actual concept from the SEC before any of this is more than conjecture, and when that might happen is still anyone’s guess.

Cross had a few other morsels of news as well…

Web disclosure. Earlier this year we saw Google ruffle some feathers when it announced that it would no longer disseminate earnings release by wire service; instead, it only announces that its earnings are available for all to see on its Website (via wire service and Form 8-K filing), and posts the full details there. Cross wasn’t terribly enamored of this idea; while she didn’t mention Google directly, she pointedly said, “I am not commenting on whether this is a best practice … I do think that companies considering this approach should consider the investor relation implications.”

But, she added, the SEC does not necessarily frown on this practice either. So long as a company publishes a press release announcing that the earnings data is available on the corporate Website or 8-K filing, then it doesn’t need to worry about the SEC’s guidance from 2008 about whether the Website is a legitimate avenue of communication, and can proceed down this path if it chooses. (I personally suspect that the number of investors unhappy with this practice falls somewhere between zero and, well, zero. I have never heard any investor tell me he or she feels unable to keep current with a company’s earnings news.)

Regulation Fair Disclosure. Cross called Reg FD “a big success” as it celebrates its 10th anniversary this year. “Everyone thought when it was implemented that it was the end of the world … I think it’s now engrained in our system.” She did warn that the SEC continues to see the need for enforcement of Reg FD “from time to time.” We may be in one of those times, since the Commission has settled two Reg FD enforcement actions in recent months, for the first time in years.

Risk Disclosure. Cross couched her words carefully, but she also hinted that the SEC is not entirely thrilled with the quality of disclosure in Form 10-Ks and proxy statements about risk. Too often, she said, companies are good at plain disclosure of a risk, but then remain silent on what plans they might have to do something about that risk. Cross said the SEC staff is mulling whether to recommend that companies must say more: “If the risks are important, then the company probably has a plan.”

Likewise, the SEC is considering—and only considering—revisiting the rules for the Compensation Discussion and Analysis in the proxy statement, because companies still fall short on thoughtful discussion of executive pay. The SEC wants to see better, fuller discussion of why executive officers are making the amounts they’re making, and not just the precise compensation totals.

More to come later this week as news dictates.

Shareholders had their say on pay at two U.S. corporations last week—and for the first time ever in this country, the answer was “no.” Motorola held its annual meeting on May 3, where only 45 percent of shareholders cast votes in favor of its executive compensation plan; 44 percent voted against it, and 10 percent abstained. Occidental Petroleum then held its meeting last Friday. The company won’t disclosed precise results until later this week, but confirmed in a press release that its shareholders also gave management’s compensation plans the thumbs-down.

For Occidental in particular, this must sting. The company volunteered last year to start offering say-on-pay votes in 2010, and then took one in the kisser its first year out. Of course, CEO Ray Irani did take home boatloads of pay in 2009 ($31.4 million, according to Occidental’s proxy statement), while revenues, net income and earnings per share all tumbled from the banner year of 2008. Then again, share price did rise from $61 to $80 through 2009 as well.

As for Motorola… well, it’s been floundering for a while, looking for a whiz-bang successor to its Razr phone. It lost money in 2008, lost money in 2009, and may well lose money in 2010, too. Last year it divided the CEO role between two co-CEOs, with intentions to cleave the whole company into two separate entities sometime later this year. Meanwhile, co-CEOs Gregory Brown and Sanjay Jha took home $8.4 million and $3.78 million, respectively. If I were an investor in Motorola, I probably wouldn’t be thrilled with that either; the stock hasn’t seen a dividend or $10 per share since 2008.

Neither of these shareholder votes is binding, so the companies don’t face any immediate need to implement the will of the masses. But consider the governance implications here. Few actions speak more loudly to investors, employees and the public than what the board pays top management—but ignoring the will of investors who have expressed unhappiness about that executive pay would be one of them. Remember that investors have never previously had a single, clear mechanism to express their views on executive pay. Now they do. Frankly, I’m more surprised that we’ve only seen two negative votes so far.

What the Occidental and Motorola boards do next bears watching. I’m curious whether their compensation committees will restructure their executive pay plans wholesale, or merely adjust compensation amounts downward so the CEOs take home less money. Or they could ignore the shareholder votes completely; that would send a terrible signal, but it wouldn’t be a first for Corporate America. And until shareholders get additional power to pressure boards—say, through the right to place director nominations in the proxy—most companies probably can ignore shareholders with little real consequence.

Of course, ethics and compliance officers could play a role in awkward corporate moments like this, acting as senior advisers to the boards on a matter of paramount importance to setting the right tone at the top—which executive pay certainly is. Then again, I’m still skeptical that any subordinate can successfully speak truth to power on so sensitive an issue. I wouldn’t relish the task. I suspect more than few CCOs would simply stand aside and let the compensation committee do its own thing. After all, if the directors drop the ball, it will be their names on the “vote no” campaign next season, not yours.

Sometimes corporate leaders step up and do the simple, ethical thing, and their tone at the top is a harmonized chorus delightful to hear. Sometimes they do the wrong thing, and their tone is more like a tribal screech of self-interest.

And then there is the messy, jangling, cacophonous governance meltdown otherwise known as Bank of America.

I hesitate to wade through the dueling tales of bad judgment at BofA outlined by the Securities and Exchange Commission on one hand and New York Attorney General Andrew Cuomo on the other. Yes, both regulators accuse the bank of withholding vital information from investors in late 2008 as it struggled to close its acquisition of Merrill Lynch—but the similarities end there. Cuomo essentially accuses BofA’s top leaders of sacking the bank’s former general counsel, Tim Mayopoulos, when he urged the company to disclose Merrill’s rapidly mounting losses in late 2008 before investors voted on the merger. The SEC, in contrast, says the bank’s leadership did act foolishly, but had no intent to hide material facts from investors that should have been disclosed.

That’s the gross over-simplification of all those headlines you’ve been reading for the last few weeks. If you want to dive into the hundreds of pages of court filings related to the case, feel free.

What fascinates (and depresses) me is the apparent lack of concern from senior executives and board directors about the best interests of Bank of America shareholders. If you read through the court filings, the BofA executives come across as manipulating the letter of the law to complete the merger by any means necessary; the boards seemed disengaged, struggling to keep pace with events, and more interested in handicapping who might end up in what role at the surviving entity.

But those two things are not always the same as the best interest of the shareholders, who saw Bank of America stock drop from $35 in September 2008 to $6.50 when the merger closed in January 2009. Those investors also had to swallow $11 billion in losses at Merrill for the fourth quarter alone, while paying Merrill $5.8 billion in bonuses for that, um, memorable performance.

The court documents (I did read them) sift through a dizzying thicket of laws and standards companies must comply with as they struggle through questions about material events and when to disclose them. But to my thinking, Bank of America’s drama embodies the dilemma of the rules-based compliance world we live in—namely, that nobody exercised the leadership to ask, much less answer, the simple question: “If I were a shareholder, would I want to know about this?”

I would want to know. And while Compliance Week’s audience may be full of lawyers and accountants, let’s not kid ourselves: regardless of the law’s specifics, you would too.

That simple, principles-based view of governance is what was missing in the Bank of America debacle. That is why federal judge Jed Rakoff dragged out settlement talks between the bank and the SEC for so long, allowing the settlement to conlude only last week. Shareholders, largely powerless to exercise any control during the meltdown in 2008, wanted some semblance of justice for the merger costs Bank of America leaders forced them to pay. They don’t want dense legal arguments over compliance with the rules; they want simple principles they can understand.

Until corporate leaders understand that and communicate in those simple terms—that is, with a strong tone at the top—expect more fiascos like Bank of America to follow.

*          *          *

And to add a fine coda to this tale, on Friday afternoon Bank of America filed its preliminary proxy statement for 2010. Let’s pluck out a few compensation numbers, remembering that all this was paid out after the Merrill Lynch fiasco closed at the start of 2009 and while the SEC and BofA were sparring with Rakoff in federal court:

• Board director Charles Gifford received $1.78 million in total compensation, including $956,000 worth of aircraft usage, $238,000 in office support, and $293,000 in a tax gross-up for the $956,000 in aircraft use.
• Lewis received a total of $4.21 million in compensation. Wisely, he took no salary or bonus in 2009; $4.18 million of his compensation came from changes in the value of his pension plan, and the rest came largely from $24,000 in financial planning services. (Note to BofA: Quicken Premier is only $89.99.)
• Joe Price, CFO in 2009 and recently re-assigned to run the bank’s consumer banking operations, and who plays a starring role in both the SEC and Cuomo complaints, received $6.12 million in total compensation.
• Chief Risk Officer Gregory Curl, who had been in the running to replace Lewis as CEO, received $10.66 million in total compensation, including $9.3 million in restricted stock. And as everyone on Wall Street already knew, the proxy statement announces that the passed-over Curl will retire at the end of March.
• Brian Moynihan, whom the board ultimately did select to replace Lewis as CEO, earned $6.5 million in total pay last year, including an $800,000 base salary and $5.2 million in restricted stock.

By the way, last year Bank of America cut 6 percent of its workforce, from 302,000 just after the Merrill acquisition to 284,000 by the end of 2009.

Much to my surprise, evidence is emerging that companies are hearing the public disgust over bloated compensation. Yes, CEOs and their top lieutenants still earn far too much compared to the average worker, and we’ll continue to see plenty of abuses and piggy behavior for years to come. But I’ve also seen multiple examples of companies reducing the pay packages they are doling out to the brass, especially some of the more odious benefits such as personal use of aircraft or tax gross-ups to cover the cost of the excessive pay a CEO already receives. This is good news.

Genzyme is one company now walking the walk. Last month the biotech business filed a statement outlining substantial reforms to its pay practices, such as pegging more of the top executives’ bonuses to overall corporate performance. Genzyme even invented a nifty new pay metric, “cash-flow return on invested capital;” grossly over-simplified, the CFROI metric should push Genzyme employees to ensure that investments they make will generate the cash flows Genzyme needs to support new products in the company’s pipeline or to make strategic acquisitions. Smart thinking.

Several other companies are doing the same, such as Shell Oil and Eli Lilly & Co. We’ve also seen a flock of studies from compensation consultants lately that have found the overall value of change-in-control agreements are dropping, and fewer companies are offering tax gross-ups to pay any excises taxes that might come due when the CEO decides to collect. (Compliance Week has written about this, but the full article is only available to subscribers.) None of that means victory in the battles to scale back bloated executive pay, but they do suggest a change in the tenor of things.

Ethics and compliance officers walk a somewhat delicate path here. First, compliance officers do have a responsibility to ensure that proxy statements explaining executive pay are in full compliance with Securities and Exchange Commission rules; that can be a complicated task, given the SEC’s new rules requiring even greater detail. But beyond the letter of the law, ethics and compliance officers have a special position where they can (diplomatically) argue for compliance with the spirit of the law—which clearly wants executive compensation to fall from “totally staggering” to “really, really big.”

I have no advice on how you can achieve that at your particular company. But telling your board “everyone else is doing it” has gotten a bit easier this year, and that’s a start.

For a while now I’ve wanted to start a Compliance Week book club. We get a small but steady stream of books here at CW Central Command examining corporate governance from various angles—some of them quite good, others clearly hitching a brief ride on the governance bandwagon until the fad that propels their pages slips away. Either way, books trying to tackle compliance and governance are a legitimate niche in the best practices and guidance out there, and deserve attention.

So today we’re going to start paying some of that attention. First up is Too Big to Save? by Robert Pozen. (Wiley, November 2009, 480 pps. $29.95)

Pozen attempts nothing less than to diagnose the problems that caused the financial crisis—like, all of them—and propose solutions. Normally I would be skeptical that anyone could do that well, but Pozen has the credentials to try. He’s currently chairman of MFS Investment Management, a $150 billion asset-management firm. He served as economic development secretary for Massachusetts under former Gov. Mitt Romney, and as chairman of the Securities and Exchange Commission’s advisory committee to improve financial reporting in 2007. I also had the opportunity to interview Pozen when he was a keynote speaker at Compliance Week’s annual conference in 2008, and can vouch that whether you agree with him or not, he has a fiercely insightful intellect and practical wisdom worth considering.

That said, this book is not for the timid or unalert reader. The causes of the financial crisis are complex stuff, and Pozen doesn’t shy away from responding with complex prose. He never overwhelms with jargon or bores with irrelevant detail, but the chapters do often feel like passages from the reading comprehension exam on the SAT. They are mentally demanding, but also lucid, straightforward and in plain language. (The chapters also have key points or sentences bold-faced, and a summary at the end recapping main themes. Really, if Pozen had just used high-gloss paper and tripled the price, he could have called it a textbook.) Keep your wits about you and be prepared to re-read complicated points as necessary, and you’ll do just fine.

The first half of the book dissects how the financial crisis occurred, reviewing each contributing weakness in our financial system in turn and then offering ideas on how to fix it. Pozen names all the usual suspects—corrupt mortgage originators, lax regulators, myopic legislators in Congress, shameless credit-rating agencies—but also gives a rich history of how those suspect elements came to be. For example, by everyone knows that the federal government pushed the idea of home ownership to reckless extremes, but how many know that Department of Agriculture tax credits were part of that push? And everyone knows that excessive bank lending introduced terrible risks to our financial system, but how many people know where banks’ capital reserve requirements come from, or why those reserve rules weren’t stronger?

Those questions are the sort Pozen tries to answer (plus many more). He goes beyond simply identifying the culprits that caused our financial crisis, to paint a picture of the policy climate that let those culprits exist and thrive. And remember, that policy climate is what we need to change if we don’t want the world to go through all this again.

Another large portion of the book gives that same analysis to the 2008 bailout of our financial system, and Pozen pulls no punches. He catalogs the long list of programs the Treasury Department and Federal Reserve have concocted to keep the financial system alive, and ultimately dismisses most as flawed efforts that expose the U.S. taxpayer to risks he doesn’t know about and doesn’t deserve. That is not to say Pozen toes the pro-consumer party line; at best, he is a non-partisan critic whose ideas would incense both ends of the political spectrum, which probably means he’s doing something right.

He opposes restoration of the Glass-Steagall Act or anything like it, as well as higher limits on insurance for bank deposits. But he does support more regulation of, say, money market funds (indeed, I read his chapter calling for greater regulation on the exact day the SEC adopted the changes he had advocated), and wants banks to carry contingent reserves to cover surprise loan losses—an idea that would bring scowls from accounting purists since it would allow banks to manage earnings. And while loan securitization has gained a bad name in the last two years, he accepts the bald fact that securitization is vital to our economic prosperity, so we can’t simply dispose of it. Pozen repeatedly demonstrates that his only concern is what works and makes sense, not what is pure or popular.

Only at the end did I find the book start to wear thin, when Pozen shifted gears to talk more about corporate governance challenges in the future and less about financial regulation in the present. Here he sounded all the usual tones, advocating shareholder advisory votes on executive pay and stronger boards of directors, and so forth. He also strove to carve out a middle ground on difficult issues like fair-value accounting or international cooperation to improve the regulatory system—which might be wise, but will not be easy.

Pozen is at his best in the first three-quarters of the book, where he chains together one punishing fact after another about how the financial crisis occurred, giving the reader a precise, vivid understanding of the problem. Then he deftly slips in a few straightforward suggestions about how the system should work, and the reader can’t help but think that this guy is spot-on.

Next

I will try to post a new book review on the third Monday of every month. Next up is Money for Nothing, an indictment of corporate boards by John Gillespie and David Zweig. (Free Press, January 2010, 320 pps. $27.)

Meanwhile, leave your own comments about Too Big to Save here, and feel free to suggest other titles for our Compliance Week book club to me at mkelly@complianceweek.com.

Shortly after that Nigerian nitwit tried to blow up a U.S. airliner on Christmas Day, I was listening to a talk radio program discussing the federal government’s response and all the new security procedures airline passengers will inevitably be asked to endure: more questioning at the security checkpoint, less freedom of movement on the plane, full-body frisks, millimeter-wave scans peering under your clothes. The host of the program asked her guests, “Will citizens of the United States really put up with procedures so invasive?”

One of the guests immediately responded: “The public doesn’t really care much if the procedures are invasive. They want procedures that are intelligent.”

Compliance officers, auditors, board directors, and governance enthusiasts, take note.

In many instances, after all, policies exist because at some point in the past, intelligence failed. Somebody didn’t notice a young Muslim man, whose name was on at least one terror-watch list, paying cash for an airline ticket. And because that rather self-evident alarm went unnoticed, we now have a new policy that every single terror tip must be investigated. New procedures to comply with that policy will be invented and enforced on government agents, who will slip into the dreaded check-the-box mentality—all because we didn’t use common sense in the first place, when we should have.

Which brings us back to corporate compliance, and our recent story: “Companies Brace for Slew of New Proxy Disclosures.”

We all know the sorry story that led the Securities and Exchange Commission to publish these rules: executive compensation growing larger and larger, even when most of the economy has been wrecked by recession for more than two years; and shareholders feeling more and more frustrated in their inability to achieve changes they want, despite a clear sense among everyone of what they want. (Mostly, they want more reasonable levels of executive pay.)

Boards and executives could have prevented much of the strain of the last two years, including the new proxy disclosures just stuffed down your throat, by delivering a more intelligent tone at the top. That tone isn’t just communicating “we enforce these rules seriously”—it’s communicating the message that “we understand what decent conduct looks like, and we intend to deliver it.”

If you want a recent example of failure to deliver that tone, look to that old chestnut of corporate bungling, AIG. Last month we witnessed the departure of AIG’s general counsel, Anastasia Kelly, because she was unhappy that the government wanted to cut her total compensation. Kenneth Feinberg, the Treasury Department’s point-man on executive pay at companies taking government bailout money, announced that Kelly’s compensation would be cut to $500,000. She balked, and led a group of AIG executives out the door (with a severance package worth $3.8 million).

Yes, Kelly was contractually entitled to more than $500,000 in compensation—but with tens of millions of Americans underemployed, and AIG taking more than $100 billion in taxpayer bailouts, that doesn’t matter. The intelligent, ethical tone to set would have been a gracious statement accepting the lower salary. If Kelly wants to work at the top of Corporate America, voicing that tone is the price you pay.

Instead, Kelly (like many other executives) sent the wrong tone. Public outrage still boils away. And regulators like the SEC chisel that outrage into more intrusive policies about executive pay disclosures in the proxy statement. Clearly, despite all our progress in governance in the last decade, we still have a long road ahead before we’ve mastered tone at the top. Expect more intrusive policies until we do.

A quick read of the Obama Administration’s proposed reforms of regulatory oversight leaves you with two impressions. First, for the large majority of compliance officers and financial reporting executives out there not involved in the financial sector, little will change. You still have much bigger concerns about increasingly aggressive folks at the Justice Department and Securities and Exchange Commission you need to worry about in your daily routines.

Second, not much has changed for those compliance officers who are in the financial sector, either: they still face too many voices in the regulatory realm, talking past each other and investors, sending conflicting messages about what financial firms are supposed to do.

To my thinking, the Administration’s proposed reforms fall somewhere between a missed opportunity and a mixed bag of under-developed ideas. Some seem sensible. Others seem to fly in the face of political reality. Most seem to have the potential to do good, but are in such an embryonic state that they could evolve into considerable new burdens or risks for corporations—financial and non-financial alike—by the time Washington is done fiddling with them.

A few high-lights:

• The agencies endure. Remember that halcyon time when everyone finally seemed to agree that the Commodities Futures Trading Commission and the Securities and Exchange Commission should be merged? Well, everyone in Washington has forgotten it. Both agencies will remain intact, doing what they’ve always done. At least one of them—presumably the SEC—will also start overseeing those over-the-counter derivatives that have caused so much trouble in the last year, but the Obama plan isn’t entirely clear on that point.

• Creation of a Consumer Financial Protection Agency. I already can envision new types of legal headache here. If an approved financial product fails to deliver on its promise—and good luck defining the scope of that—could an aggrieved investor sue the firm that sold it? Could corporations then claim some sort of pre-emption defense, akin to what drug-makers claim under Food and Drug Administration rulings? We also have no word on who would appoint this agency’s leadership. This is an important detail; remember, plaintiffs have hauled Public Company Accounting Oversight Board in front of the Supreme Court, saying its SEC-appointed leadership is unconstitutional.

• Enhanced regulatory cooperation internationally. The Administration might as well put this proposal out for comment in MAD Magazine. Politicians on both sides of the Atlantic are so busy pressuring securities and accounting rulemakers to relax the rules as a means of inflating economic growth, nobody will have time to develop a serious framework for international oversight of large institutions. That’s a shame, because we need one.

• Compensation crackdown! Don’t die of shock, but all public companies would now be required to let shareholders have an advisory vote on executive pay packages. They would also need to establish more independence on the board’s compensation committee, and achieve the fabled “alignment of executive pay with long-term shareholder value.” All of this is about as surprising as sunrise in the east. I was hoping the Treasury Department would decree that all CEOs are to be immediately enslaved.

• More accounting reforms. Financial firms would be required to use more forward-looking provisions for loan losses. Originators and issuers of securitized loans would be required to keep a financial interest in those loans. And fair-value accounting rules, which always crop up in these discussions, would get yet another examination to see how they can increase the transparency around cash-flows from holding investments. I’m not sure whether that’s code for “letting banks say they’re not going to sell worthless assets, so they don’t need to say the asset is worthless”—but since Congress already forced the Financial Accounting Standards Board to relax fair-value rules, I’m not sure we need to ask.

Alas, nowhere do we see some of the more creative solutions floated in past months, like imposing a small transaction tax on stock trades to curb speculators, or integrating the CFTC and SEC, or re-instating the Glass-Steagall Act to segregate investment banks and their dumb decisions from commercial banks that consumers depend on. Those were good ideas—and to boot, they could help unravel the financial crisis without imposing drastic new challenges on Corporate America and on the chief compliance officers who must ensure those challenges are met.

Instead, we will see a hodge-podge of regulatory reforms meander their way through Washington. Even if these ideas sound good—a statement I don’t know that I support, but it may be true—they will still need enforcement mechanisms. They will need to be quantified in data, which will need to be collected, disclosed, and reviewed or audited. How are you, the corporate compliance or governance executives, supposed to achieve that? Nobody really knows yet.

So like I said at the start—not much has changed.

Amgen is trying a new tool to blunt some of the shareholder outrage over executive compensation: a survey.

Tucked away on page 51 of the pharmaceutical giant’s proxy statement is mention of a page on Amgen’s website where shareholders can fill out a 10-question survey asking what they think of the company’s compensation policies. We at Compliance Week haven’t seen something like that before, and we doubt it will placate shareholders all that much—but it’s a gesture, and a much more conciliatory one than the gesture shareholders are giving corporations these days.

The survey itself comes from TIAA-CREF’s criteria to evaluate the Compensation Discussion & Analysis discussions in corporate proxy statements. We couldn’t find any direct link to the survey page from anywhere else on Amgen’s website, and corporate spokesmen couldn’t immediately tell us how many people have submitted their opinions since the site went live sometime late last month. (Amgen filed its proxy statement on March 26.) So clearly this is what the folks in marketing call a “soft-launch” product.

We do have a few concerns: Amgen could do a better job alerting shareholders to the survey’s existence (it only gets a two-sentence plug at the end of the CD&A’s executive summary). Security is loose; we identified ourselves as one Gregory House, M.D., to get past the registration page and see the survey questions. And of course, if Amgen were truly determined to gauge shareholder views on compensation, it could send out that survey in a paper mailing of some kind. 

Still, the concept gets a thumbs-up from us. Amgen wasn’t required to offer a survey like this at all. It provides relevant information from the proxy statement for each survey question, so people can see the company’s argument for approving its pay policies. For example, Question 4 asks: “Are the incentives clearly designed to meet the company’s specific business challenges, both short and long-term?” Right after that is a URL link to a two-paragraph response from Amgen, with more links to the specific pages in the proxy statement that address the point. Clearly, somebody at Amgen put thought into collecting this feedback.

The grand question still is how Amgen will now use the feedback it gets; if this survey is just a showpiece to help achieve a smooth annual meeting (Amgen’s price is hovering just above 52-week lows), that’s sad. But there are easier ways to make empty gestures, so we suspect this one is legitimate. And it’s certainly an idea other companies should mimic.

Back in the 1990s, I was a big fan of The X Files. Little did I know that the central tenets of that program—distrust, cynicism, and a deep suspicion that people in Washington are controlled by aliens—would be so useful when analyzing the economic stimulus bill. 

Compliance officers and corporate secretaries in the financial sector have spent the last two weeks with one watchful eye on the Treasury Department and the other on Capitol Hill, as lawmakers whirled out all manner of attacks on executive pay. Politically, walloping overpaid CEOs has been great theater. Practically, the theatrics have led to increasing confusion about exactly what is supposed to be included in the corporate proxy statement due later this spring. And the Fox Mulder disciples out there, trusting nobody, have been wondering when the new pay restrictions would start applying to all companies, not just those receiving government bailouts.

Then came Friday, and things started to get really weird.

Earlier in the week, the Senate had passed a stimulus bill with severe restrictions on executive pay. Most notorious was a provision that merit pay (that is, bonuses and performance-based compensation) could not be more than one-third of an executive’s total pay package. That was more far-reaching than anything the House had passed or the Treasury Department wanted to see, so late in the week that provision was deleted as part of the usual haggling that goes on when important bills are near a vote. Everything looked splendid; on Friday morning I even checked a copy of the House bill myself (the only version available to the public) and nary a peep was included about the Senate’s restrictions.

Then Sen. Christopher Dodd, chairman of the Senate Banking Committee, slipped the provisions back in sometime later in the day. By evening, when the final bill was passed, those original, severe Senate restrictions on executive pay were the law of the land. And they apply to the top 20 executives at any company taking government bailout funds.

Were this an election year, I’d assume Dodd had the pure and age-old motive of pillorying an unpopular group to score points with the public. But we just staggered through an election, and Dodd is actually interested in the business of governing—which is all about doing favors for the special interest groups that support you financially.

So I can’t help but notice the other major provision Dodd slipped into the stimulus bill: a clause letting TARP recipients repay their government loans much more quickly, which in turn would let them evade these onerous pay restrictions and resume their normal, bloated lifestyles. Nobody is saying that quick repayment is a good thing; in fact, the banks could well return back to their under-capitalized state too quickly and be just as endangered as they were in the first place. But they would also be able to give their executives whatever fat compensation they like—which is what the bank executives wanted all along.

The banks didn’t like the Treasury Department’s pay restrictions. Then along come even worse restrictions, and a neat way to escape the whole mess of compensation reform entirely. It makes you wonder: Were the banks behind Dodd’s seemingly bone-headed stunt in the first place?

Like Fox Mulder said, trust nobody.

Look, I’m all for skewering overpaid CEOs while they’re still alive and roasting them over an open flame. But could we at least put a little thought into the process?

That seems to be the missing element in the Obama Administration’s new rules for executive compensation. I appreciate the spirit behind them, and I’m sure most other taxpayers do, too. But the more I read through the Treasury Department’s summary of the rules, the more they strike me as vague, ill-conceived and almost destined to tie compliance and governance executives into knots.

Let’s walk through some of the basics, and the problems therein:

• The $500,000 cap on total compensation. Nobody says exactly how this figure is calculated, or to whom a company is supposed to “certify” that pay doesn’t exceed that amount. I assume it’s the same number that companies report in the Summary Compensation Table of the proxy statement, and the CEO’s signature there would count for the certification you’re supposed to make. But that’s just a guess in the absence of any clear answer. And last I heard, companies were still struggling to understand how to value slippery pieces of compensation plans, usually the ones based on stock options or other equity.
  

• Expanded clawback provisions. A company’s top five named executive officers must already agree to clawback provisions in case their compensation is based on bogus performance; now the Administration wants to expand that to the top 25 senior executives. What company keeps track of that sort of stuff? What happens when the assistant vice president gets in a huff because she’s 26th on the list and worried that she’s ripe for a layoff? And spare a thought for Jerome Kerviel, the footman trader at Societe Generale whose scams left the bank on the hook in 2007 for $7 billion. How useful were clawback provisions there?

• Disclosure of how compensation policy aligns with sound risk management. I thought we were already doing this, per the Securities and Exchange Commission’s amended disclosure rules in 2006. Maybe I was wrong. Or maybe the Administration is trying to give the appearance of action by repeating the exact same regulation, just more loudly.

• A board-approved policy on luxury expenditures. Otherwise known as the John Thain clause, this rule is intended to stop nitwits like Thain from spending $87,000 on a new office rug. But until somebody clarifies what a luxury expense is, the rule’s actual effect will be to limit all rewards and entertainment for all employees, everywhere, to one platter of pigs-in-a blanket at the office holiday party.

Again, I fully support some sort of cap on executive pay for companies taking government bailout money. In fact, the argument that caps will prompt these CEOs to quit rather than accept government oversight makes the idea more attractive, considering how disastrous their leadership has been. The tone at the top of these companies hasn’t been one of corruption or condoning unethical behavior, no—but it has been one of ineptitude, and that’s not good.

Still, the details of these new rules are woefully lacking. Nobody has published an actual text of them yet, and it appears that Treasury hasn’t integrated its lofty ideas with the hard-nosed regulations about compensation disclosure the SEC already requires. So you, the compliance officer, are probably sitting around wondering what all these pronouncements mean to you. Right now it looks like nobody has an answer. The cynic in me can’t help but wonder if these rules were rushed through final review and onto the presidential podium, to divert public attention from the sudden wave of Obama cabinet nominees who can’t seem to pay their taxes. That’s not a good tone at the top, either.