Executive Compensation

The story today in the NYT on stock options for Nelson J. Marchioli, the CEO of Denny's, is yet another illustration of a market problem in executive compensation.  Denny's was paying its CEO in "in the money" stock options (options with an exercise price below the market price at the time of the grant, a discount).  Most compensation options are awarded "at the money" (exercise price is at market price at the time of the grant).  Some are "out of the money" (exercise price is above market price at the time of the grant).  The "in the money" stock options have immediate value equal to the discount.  The value is cash value if the options can be exercised and the underlying stock sold immediately or if the options can be sold immediately.  Yet the value was hidden in the public filings of Denny's.  Only a tipped off, thoughtful NYTs reporter, Eric Dash, could find it.  Corporate officials say market forces determine executive pay and then work very hard to hide the pay from the shareholders, those who are paying the salaries.  Disclosure rules are stretched to the limit with the sole aim of avoiding a full disclosure to shareholders on the full amount of pay packages granted CEOs and other senior executives.  Boards who pay such salaries as agents of the shareholders are fearful of telling their principals, the shareholders, how much they are paying seniors executives.  There is no market working when one-side in a bargain cannot figure out the facts.  It is a national disgrace.  And I am disgusted that I am moved to write something that sounds like it came out of the mouth of Jimmy Carter.