As the numbers were used in the Waxman hearings, Swinford says, "they created an impression that if a consultant is involved, pay is higher. Frankly, I think that is a perception that 15 years ago had some validity. But it's a feature of the past. Many of us now work almost exclusively for boards, and we spend a lot of time helping managements understand the pay marketplace."

In a final blast, the Meyer CEO points out that some of TCL's most dramatic variances among consultants are primarily a function of the type of client they serve. For example, Compensia and Radford serve younger high-tech companies, for which base salaries would be a much smaller proportion of income compared to restricted stock and long-term pay. Yet those industry differences were not explained in the study.

For its part, Compensia seems less upset with the numbers. "I always take what they put out with a grain of salt," says Timothy J. Sparks, Conpensia's president, of the work of the Library. "I think it probably reflects a mistaken understanding of the role that consultants really play." Consultant-corporate relationships these days "run the gamut, with some program design, and other work dealing with boards," he tells CFO.com. "Trying to correlate consulting firms with particular outcomes is a suspect objective."

There was, however, one clear benefit to Compensia from the report. "We've only been in business for four years," he says, "so to be considered one of the top 10 in the country is something we welcome with some pride."

An Industry in Transition
George B. Paulin, chairman and CEO of F.W. Cook, thinks there was "a direct relationship" between the numbers released by TCL and the Waxman hearings several weeks later, even if the Library didn't specifically take the strong anti-consultancy position that some others did in the House committee testimony.

Among his complaints about the report is the loose use of time periods for which results are reported. "If the program that paid in 2006 was put into place in 2005, and the target bonuses were set in 2006, does that make a difference?" he asks. "By inference, they're relating the result that occurred for a certain period to the advice given during that period. That's one thing that concerns me." The report, he adds, "didn't look at the whole of compensation; it looked at pieces of compensation."

Another concern, also growing from how the Library's numbers were used in the Waxman hearings, was that TCL didn't make clear that certain consultants are units of insurance companies — or were at the time — and thus were in a different category from independent firms such as Paulin's own.

"The whole industry is in transition now, the result of big companies trying to safeguard against the accusation that there's conflict of interest here," he says, adding that at Cook "we've sort of been a beneficiary of that."

Still, TCL went out of its way not to enter the discussion about conflicts of interest, and it maintains that there was no coordination between the Waxman committee's use of its numbers to suggest that conflicts of interest created an agenda among consultants to pump up corporate pay packages.

"That stance of being neutral was intentional," says Corporate Library senior research associate Paul Hodgson. "This is the first year there has been widespread disclosures of consultant use, and who they are. With a single year to go on, you can't reach many conclusions." He adds that this initial report is seen as the first building block in a research structure that is intended to be of great use to companies and shareholders. "This is an area we're going to revisit, definitely, as we get better data. As we move through the years of disclosure, we will certainly add in three-year and five-year total shareholder return as well."

In preparing the report, TCL itself says it found some long-term compensation data hard to extract from the corporate disclosures. But also, "we were trying to look at the more traditional elements of compensation policy," and restricted stock and some long-term incentives were seen as "newer" forms, Hodgson says.

With the limited data, TCL steered clear of commenting on the area of consultant independence, for example, he notes. "It's not an issue we considered. If people were trying to draw conclusions like that from the report, it didn't concern us at the time." The Waxman committee "had additional data," Hodgson says, based on surveys that showed what types of work consultants were doing with companies. The combination of such information with the Library's data, especially when it covers longer time spans, offers a promise that future TCL reports can be of great use in compensation planning.

Says Hodgson, "What I would like to test in the future is whether the advice given initially, in terms of designing a compensation plan, provides the outcomes that were worked out for management, as well as for the shareholders."

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