Corporate America is quietly seeking to muzzle the compensation consultants who routinely provide information about executive pay to the business press or to regulators, even though much of that information is already in the public domain.
Leading the charge are John S. Reed, chairman of Citicorp, and H. Brewster Atwater Jr., chairman of General Mills Inc., with several other members of the Business Roundtable, an influential group of chief executives.
Their motives appear to be twofold. For one thing, few executives enjoy having their pay packages put under a harsh public spotlight. But what the chief executives seem to fear more are regulatory proposals to force them to reduce the earnings their companies report to better reflect the cost of their compensation.
If these proposals are adopted, directors may feel more inclined to curb pay.
In many ways, the chief executives' campaign has been invisible, consisting of subtle hints rather than bare-knuckled threats. And it has caused strains in what has been a cozy relationship between corporate managers and compensation consultants.
The consultants typically suggest compensation packages for executives and other employees, often based on surveys of rival companies. Thus, they derive much of their income from projects that emanate from companies' human resources departments. So even the barest suggestion that a client's chief executive may be unhappy can send shudders through a consulting firm's senior ranks.
"The Business Roundtable let a number of consultants know in no uncertain terms that they would not view this as responsive to clients' needs, which is a buzzword," said Michael J. Halloran, head of Wyatt Co.'s executive compensation practice, referring to the help consultants have given to reporters or regulators.
Spokesmen for the Roundtable said neither Mr. Reed nor Mr. Atwater would be available for comment.
The pressure tactics against the half-dozen or so firms that routinely provide this information seem to be working. Frederic W. Cook & Co., a small compensation-consulting firm, now refuses to take questions from reporters, and others refer delicate assignments to smaller firms that may have less to lose by alienating the big companies.
"One of the major firms recently referred some business to me to provide expert testimony on some valuation issues, because of the sensitivity of their clients," said Stephen F. O'Byrne, senior vice president of Stern Stewart & Co., a smaller compensation firm. "It's their position that it's a no-win situation to take a clear public position."
The Roundtable scored an even bigger coup this summer when some of its members who are clients of Towers, Perrin, Forster & Crosby Inc. led that firm to conclude that it was not in its best interest to continue helping the Wall Street Journal prepare the executive pay survey it publishes each spring.
According to several consultants, the clients who complained did not even take into account the fact that the Journal's survey is one of the few that does not put an expected future value on executives' stock options in the year they are granted; it simply provides historical information contained in proxy statements on the actual stock gains that executives have realized.
"Just being associated with people's pay figures in the paper stirred up more trouble than it was worth," said Mr. O'Byrne, who left Towers, Perrin in April.
Mr. Halloran of Wyatt Co. said he had gotten half a dozen calls from irate clients after his firm helped prepare the 1991 pay survey that recently appeared in Fortune magazine, which estimated the value of stock options.
While not all the callers reminded him of how much business they did with his firm, he said, "a couple said they've been good clients of Wyatt for some time and wanted to understand how we did it and to what extent we felt strongly their options were worth that much."
He said he did not know of any lost business for his firm because of the Fortune assignment, and for now has no intention of buckling. But "one often loses a lot of business you're not aware of," he said.
Other firms, like Hewitt Associates, just want to stay out of the fray. Its chief executive, Peter E. Friedes, --ed off a conciliatory letter to clients on June 24.
The letter said the firm had declined an opportunity earlier in the year to assume responsibility for Fortune's annual pay survey, and it reassured them that any cooperation it provided regulators was "geared towards bringing a client perspective to these deliberations."
Some of the nastiest showdowns have taken place over the touchy topic of how companies should account for executive stock options on their own financial statements. Companies are generally not required to report the costs of options.
Stock-option plans typically give executives the right to buy shares in their companies at a fixed price at any time over several years. Sometimes, the rights expire worthless, and sometimes they make their holders rich. But the executive can never be worse off for having had the opportunity.
Yet, despite their clear value, stock options are the only significant form of compensation that make no dent on net earnings reported under current accounting rules.
The Financial Accounting Standards Board wants to close that loophole, and many chief executives are understandably worried that their boards will be reluctant to grant stock options if companies have to start reducing their earnings by the estimated value of the awards, since the true cost to shareholders would become more apparent.