Loans to Top Executives Are Common among Colorado Companies, Documents Show.

ANNOUNCER: This is Lou Dobbs` MONEYLINE for Tuesday, May 28th. Here now Lou Dobbs.

LOU DOBBS, CNNfn ANCHOR, LOU DOBBS MONEYLINE:

Some CEOs drive their companies into the ground, while they run away with millions of dollars. Frank Glassner , an authority on executive compensation, will be here to tell us how to stop the madness.

Coming up next, compensation expert Frank Glassner will be here to tell us how to stop those greedy executives from giving themselves those huge, unjustified pay raises from huge, unjustified pay levels. Stay with us.

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DOBBS: Now the results of our poll. We asked if you think American corporate CEOs are overpaid and here is how you responded. It doesn`t look a bit indecisive. Yes, 98 percent. Two percent, as my colleague, Wolf Blitzer would say, these of course are not scientific polls, but they are revelatory.

It`s no secret executive compensation is out of control in this country. Angry investors, angry employees, are demanding change. Frank Glassner has some ideas on how to bring about that. Frank is the CEO of Compensation Design Group, a nationally respected expert on CEO compensation.

Frank, how in the world did we get to this level, that CEOs can walk away with sums approaching $200 million, irrespective of the performance of their company?

FRANK GLASSNER , CEO, COMPENSATION DESIGN GROUP: I think that some of those sums even exceed $200 million. But executive pay today can be described in three words, Lou, and that`s "out of control." While over the past 10 years the wages of, let`s call it the rank and file worker have increased about 34 percent, executive pay in aggregate has increased 360 percent.

And there`s got to be something wrong with that picture. Now, we have no objection to pay for performance. As a matter of fact, Compensation Design Group has been advocate of pay for performance since its inception. But where pay is so significantly disconnected with performance, and the boards give a nod and a wink and still go ahead and pay, there`s, like I said, a fundamental problem with that.

DOBBS: It`s a fundamental problem. We`re seeing it in exit packages. Terrible CEOs have done just horrible jobs in running their companies, protecting the interests of the shareholders, working for the boards of directors, walking away with huge pay packages. The CEO of Kmart (URL: http://www.kmart.com/) is one example. How can that happen?

GLASSNER: I think that it`s written into their contract per se, and a board once again, giving a nod and a wink. The CEO, or I should say outgoing CEO of Kmart, is walking out with approximately $20 million. And funny enough, the current CEO, who`s responsible for bringing the ship through the bankruptcy, has over $4 million in guarantees. I wouldn`t call that pay for performance in the case of the outgoing CEO. I`d call that pay for attendance.

DOBBS: In some cases we`re even not getting attendance. What are we going to see happen here? Shareholders seemingly, at least to me, have fewer rights now than they did at the end of the `80s, when there was a great deal of discussion about shareholder rights. There seem to be fewer.

Boards of directors, while they`re very concerned and wrought up now about inadequate accounting practices and financial reporting and disclosure, what`s going to happen? Is there any way to change what is happening?

GLASSNER: The only way to change it is, you know, for the boards certainly to take their heads out of the sand and start making those hard decisions. If a CEO in a company is not performing, they have to make that hard decision to say no, we`re not going to pay your bonus this year. No, we`re not going to give you an additional grant of stock options.

Perchance, you know, the stock options should start to have performance-based accelerated vesting. Make them cliff-vested, versus automatically vest every year just for being there. And lastly, shareholders have a call in this too. It is...

DOBBS: Well, the idea that a CEO, without any, as it became popular on Wall Street and -- any skin in the game. That is, with a stock option they can win, should the stock price rise. But they lose absolutely nothing for poor performance. Why not simply issue a loan, or insist that a CEO have a significant amount of money at risk?

GLASSNER: Well, the CEO has the money at risk, in the sense of having the stock options and getting paid or not paid. However...

DOBBS: I`m talking about in the sense of getting either paid or punished, just as his or her investors would be?

GLASSNER: Well, that`s what we`re saying. Instead of making the vesting of the options automatic, the options should be cliff-vested. So let`s say, you know, at the end of a three or five year period, if those performance goals are met, you accelerate the vesting.

And when you talk about loans, not to forgive those loans if performance is not met.

DOBBS: Frank, it is good to have you here. Frank Glassner , come back soon. This subject is not going away.