Bert Caldwell: SEC tugs on reins of runaway bonuses

In case you missed it, bonus week is over.

Wall Street’s princes — no princesses, at least at the tippytop — now know what to expect in the way of a 2006 bonus.

At Goldman Sachs, new Chief Executive Officer Lloyd Blankfein rang up $53.4 million, tops on the street and an all-time record. And it was just his first year in charge of the investment banking firm, which earned $9.4 billion this year.

John Mack, CEO at Morgan Stanley, held the record for just one day with his $40 million. Mack has been at Morgan Stanley 18 months.

Lehman Brothers Holdings’ Richard Fuld will get just $10.9 million, but directors anxious to retain him also arranged $186 million in stock over the next 10 years to assure he does not leave.

To go where?

New York State Comptroller Alan Hevesi last week estimated workers in the securities industry will be awarded bonuses worth almost $24 billion,or an average $138,000. He was delighted because New York and New York City will take in more than $2 billion in taxes from these lucky few.

Alas for Mr. Hevesi, Friday he plead guilty to a felony charge of misappropriating state resources. He assigned state workers to act as personal drivers and aides for his wife. A clear case of bonus envy?

Hevesi is not the only one. But envy has finally begot anger among shareholders whose interests are not always best served by CEOs who monkey with earnings statements in order to fatten their own wallets. Proxy statements supposed to reveal the compensation of the top five officers are often unintelligible to lay readers. And they have little hope of overturning pay decisions made by corporate insiders unless institutional investors object, too.

Rules implemented Dec. 15 by the U.S. Securities and Exchange Commission may improve the odds.

Corporations now have to discuss executive pay in greater detail, and plainer language. Cash is never a mystery, but that may be a token compared with the value of pensions, stock options, restricted stock, and golf club fees. The list goes on and on.

Remember the surprise when divorce revealed just how many perks former General Electric Co. CEO Jack Welch enjoyed?

Those goodies will have to be disclosed, with a final column providing a clear total value. A similar table for directors — who too often are little more than rubber stamps — must also be included in the proxy.

The SEC published a draft of the rules last January, and received more than 20,000 comments before adopting them in July. That was a record, and a clear indication investors are weary of executives soaking up fortunes, and soaking them.

The reaction will not stop there. Newly powerful Democrats want to do more to rebalance the compensation scale. If Rep. Barney Frank, D-Mass., has his way, shareholders will have a direct vote on executive pay. Frank will chair the House Financial Services Committee.

Frank might want to include a provision that would allow constituents to vote on congressional salaries. Now, that would bring voters to the polls.

In the Senate, Byron Dorgan, D-N.D., who will chair the party’s Policy Committee, is also unhappy with the pay disparities.

But the real action will come this spring, when shareholders finally get a clear look at just how much corporate leadership takes out of the till. They will have to look. And vote. Many proxies end up in the circular file with mail-in ballots.

Princes stay princes because the paupers do not send in their proxies.

Merry Christmas. We all earned that, anyway.