03/08/2009 05:12 am ET Updated May 25, 2011

The CEO Pay Caps Are A Mirage

I'm all for a little rhetoric and bashing CEOs who, as a class, have lined their pockets while pillaging the country. But, if the point is to stop the legal looting of corporate treasuries and leave some money in the till for regular workers, when you get right down to it, the CEO pay caps the administration announced yesterday are simply a mirage: something you think is meaningful but isn't. Here's why.

If you read the Treasury guidelines, it's pretty clear that this is smoke and mirrors.

First problem, which has been identified by others:

Limit Senior Executives to $500,000 in Total Annual Compensation Plus Restricted Stock - Unless Waived with Full Public Disclosure and Shareholder Vote: Companies that participate in generally available capital access programs may waive the $500,000 plus restricted stock rule only by disclosure of their compensation and, if requested, a non-binding "say on pay" shareholder resolution.

Huh. Effectively, what that says is that there really is no cap on pay. Can you name a single shareholder vote that went against management? There are a few but they are so rare that, unless you are deeply immersed in the topic, you can't recall a single instance quickly. As well, what does "public disclosure" mean? For years, companies "publicly disclosed" the massive pensions they were handing out to executives but they were so buried in the "public disclosure" documents filed with the Securities and Exchange Commission that when the SEC finally changed the disclosure rules in 2006, the funniest part of the SEC's announcement of the new rules -- and a comment on how companies had gotten away with the corporate thievery, in part, because of poor SEC oversight over the years -- came in the commission"s press release: "The rules will require companies to prepare most of this information using plain English principles in organization, language and design." [the emphasis is mine with a hearty chuckle]

So, what the Treasury is saying is this: if you publicly disclose -- meaning, put it in writing in some vague way -- and you put it to a shareholder vote you know you will win, then, you can pay the executive whatever they want. If you want real changes in CEO pay, you have to start with the way power is distributed in a corporation -- not by promulgating toothless rules.

But, that's not even the biggest problem. Let's say that a company doesn't control its shareholders AND is afraid of the uproar among the masses over "public disclosure" (both circumstances being quite unlikely coming as a pair). It can still enrich its executives because CEO pay isn't really where the big money is.

It's in CEO PENSIONS. And the Treasury rules say NOTHING about pension benefits.

When Edward Whitacre, for example, retired as CEO of AT&T in 2007, he received retirement -- drumroll, please -- $161 million as a pension package -- the third highest in U.S. corporate history--not to mention the $1 million-a-year he gets as a consultant to the company. According to The Corporate Library, some other "parting gifts" awaiting other CEOs include the $83 million (probably higher by now) locked in by Kenneth D. Lewis, the CEO of Bank of America Corp., which we learned yesterday spent $14.5 million to influence Congress and received $45 billion to date from the bailout bill.

In fact, sometimes, as The Wall Street Journal revealed, the pensions of CEOs, in particular those banks receiving bail-out money EXCEED the total pensions paid to the ENTIRE rest of the bank's workforce.

So, until you really go where the money is, to paraphrase bank robber Willie Sutton, we still will have Sutton-like robbery, though, unfortunately, the CEO version is legalized.

So, look, you want to rake CEOs over the coals, go for it. I like the spectacle myself of out-of-touch people claiming they can't live on $500,000-a-year. But, I think we should be much more focused on using the billions of dollars we are doling out to rescue the incompetent and greedy captains of finance to lock in some real change.

So, I'd be much more excited about forcing those institutions who take our money to be required to stay neutral in union organizing campaigns, as I proposed the other day. That's change you can believe in.