The relationships between corporate compensation committees and their consultants is under increasing scrutiny.
The earth began to shift earlier this year with the revelation that Verizon Communications (nyse: VZ - news - people ) paid Hewitt Associates (nyse: HEW - news - people ) several hundred million dollars over the years for human resources work while Hewitt also served as the CEO compensation consultant. It's obvious that there is a potential conflict of interest for the consultant to recommend big pay packages for CEOs, who then direct consulting business back to the consulting firm. In today's climate, even the appearance of such a conflict is unacceptable.
But there are other forces coming into play. The new compensation disclosure rules issued by the U.S. Securities and Exchange Commission are going to open up the relationships between comp committees and their consultants. For the first time, comp committees are going to have to disclose precisely which consultant they used, and they are going to have to describe the thought process that led them to grant a certain level of compensation to a CEO.
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