Page 665 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

650 The Complete Guide to Executive Compensation

• Pay and benefit plans, especially for senior executives, went through a period of
increased complexity resulting from the layering on of design limitations, beginning
with varying ordinary income tax rates starting in 1913; disclosure and purchase-sale
requirements of company stock required by the SEC beginning in 1933; accounting
treatment of company stock plans by the accounting profession, especially beginning
with the Accounting Principles Board in 1972; and several periods of federal pay
controls, the most recent being in the early 1970s.
• Starting with time and motion studies in the 1920s, the breakdown of a job into defin-
able steps led to the development of a myriad of internally driven plans to evaluate
the value of a job over the following half century. But the shift to market pricing
jobs based on the availability of survey data over the last several decades has led to the
de-emphasis of their internally focused evaluation plans.
• Trade unions were a significant factor in the introduction and expansion of employee
benefits plans, especially during a period of about 30 years beginning in the late 1930s.
But, as Congress began passing pay and benefit laws, the influence of unions waned
and many of the pay and benefit gains obtained by labor unions following several
decades after World War II were cut back by bankruptcy courts or completely lost
by companies going out of business in the 1980s and again at the beginning of the
twenty-first century.

The twenty-first century has seen a presidential election decided by the U.S. Supreme
Court and the invasion of Afghanistan and Iraq following terrorist-hijacked planes crashing
into the Pentagon and World Trade towers. It has seen the continued development of exec-
utive pay packages of enormous size and CEOs charged with financial manipulations. All of
this, and we are only several years into the century
What lies ahead? Who knows. What we can expect are more changes of a significant
nature in political and business matters. These will have a major impact on executive pay.
Some will develop quickly, but others will give warning signs. Is it really surprising that
following a number of high-profile financial fraud situations the Sarbanes-Oxley Act became
law? Or earlier, following little progress by companies to address the collapse of the
Studebaker pension plan, that ERISA became the law of the land? If the public believes
a problem is not being addressed, Congress can be expected to take action. In the first
150 years as a nation, there were a little over 10 laws affecting executive pay; since then, there
have been more than 100. Anyone who believes life will get simpler still probably believes in
the tooth fairy.
Note: You are again reminded not to rely on accounting, tax, SEC, or other professional
service statements in this chapter. You need to seek appropriate professional counsel for such
guidance. Statements made in this chapter and elsewhere are offered as being illustrative to
help frame such further investigations by the reader with counsel.