Hush Money

Nothing is as bothersome to corporate CEOs as the annual ritual of subjecting their compensation to outside scrutiny. Disclosures of king-size pay packages and royal perks regularly rouse public resentment and shareholder revolts, not to mention congressional calls for reform. Unable to cap the criticism, the bosses are moving quietly but aggressively to plug the flow of information. In their cross hairs are the compensation consultants who prepare the data under contract with big corporations. Led by the Business Roundtable, the captains of industry have issued veiled threats to consultants who share information with journalists, financial analysts and regulatory authorities. The message: Stop cooperating or lose future business.

Several major consulting firms such as Hewitt Associates, Hay Group and the Wyatt Co. have received letters and phone calls from unhappy clients. The firms are vulnerable to such high-pressure tactics because they depend on the companies for much of their overall business, which also includes actuarial services and benefits consulting. Some firms have decided not to take the risk. Towers Perrin says it will no longer help prepare pay surveys for the media. But the bullying isn't likely to silence calls for reform. The Securities and Exchange Commission wants corporations to include more detailed pay data in proxy materials, and the Financial Accounting Standards Board plans to force companies to deduct the present value of stock options from reported earnings.