Independent Advisers Stand to Gain

An executive pay consultant in Upper Saddle River says inquiries from potential clients soared in recent weeks because directors of some publicly traded companies fear increased government scrutiny.

Paul Dorf, managing director of Compensation Resources Inc., said the firm has seen "a dramatic increase" in requests for price quotes.

With possibly greater government involvement in how executives — particularly at banks — are compensated, some boards are more wary than ever about getting advice from firms that provide other services, such as employee-benefits consulting or brokerage service. That could create conflicts of interest.

As a result, boards are reviewing their relationships with executive pay advisers, and some are looking for a change. Smaller, independent players, such as Compensation Resources, are well-positioned to grab market share, said Dorf.

"We do not do benefits work," he said.

A conflict of interest involving an advisory firm may be harmful to shareholders if, for example, the firm courts favor from a chief executive officer who brings employee-benefits work their way. The firm might want to reward that executive by recommending to the board that she receive a fat pay package.

A Security and Exchange Commission proposal is designed to combat such activity by requiring public disclosure of those relationships.