The following are excerpts from an article in the Friday January 23, 2009 Wall Street Journal by Mark Maremont. These points tie directly into our second point in the Plan. If executive pay is curtailed within a specific set of parameters, the people at the top of the company cannot navigate loopholes in the system to benefit themselves when no other employees receive such treatment.

Some major companies are boosting the value of retirement plans for top executives by using a generous formula when converting a pension into a single lump-sum payment.

The practice, which remained largely unknown until a recent change in federal disclosure requirements, can increase the value of a CEO’s pension by 10% to 40%, sometimes amounting to millions of extra dollars. The additional sums aren’t always fully reflected in annual pension-benefit tables included in proxy statements, or in company financial statements, due to the complexities of accounting and disclosure rules.

Some companies have been basing their calculations on an obsolete federal interest-rate formula that many experts say tends to produce an inflated payout. “It’s a sneaky way to give executives larger pay,” says Ron Gebhardtsbauer, a former U.S. Senate pension expert, now head of the actuarial-science program at Pennsylvania State University’s Smeal College of Business.

Business groups have successfully lobbied Congress to be able to use a less-generous formula when it comes to paying out pensions for regular workers. Pensions for most workers are federally regulated, and corporations argued that their coffers were being depleted by large lump-sum distributions.

Generous payout calculations for executives’ pensions have been around for many years. But they were almost impossible for the public to discern until 2007, when new Securities and Exchange Commission disclosure rules took effect. The rules required companies to place an overall value on their executives’ pension benefits, and to reveal key assumptions underlying the calculations, among other things.

Details of how companies calculate lump-sum payments typically are buried in footnotes in proxy statements, often written in technical language.

Here’s where the hidden pension boost can come in. In theory, the interest rate should be linked to a market rate, in order to accurately value the lump sum at the time of retirement. But if the company picks an interest rate much lower than market rates, that results in a higher lump-sum payout to an executive. Because executive pensions are unregulated, companies are free to choose any interest rate.