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Board Members, Executives and Family Members Can Still Benefit

"We are confident that we've complied with all of the relevant regulations," said Ann L. McDaniel, a vice president and spokeswoman for The Post Co.

Hiring Family Members

The Washington Post was among a number of publicly traded companies that employed relatives of top executives and major shareholders. Marriott International listed six members of the Marriott family, besides chairman and chief executive J.W. Marriott Jr., in its latest proxy report this spring.


TeleCommunications Systems chief executive Maurice B. Tose is developing an office park where his company has agreed to lease space. (James M. Thresher -- The Washington Post)

_____Compensation Report_____
The Region's Highest-Paid Executives (The Washington Post, Aug 16, 2004)
Pay for XM Executives Modest as Stock Recovered (The Washington Post, Aug 16, 2004)
Lucrative Cash Package Came as Fairchild Reported $53.2 Million Loss (The Washington Post, Aug 16, 2004)
Expense Issue Draws Mixed Views From Companies (The Washington Post, Aug 16, 2004)
Survey Estimates Values of Options, Excludes Exercises (The Washington Post, Aug 16, 2004)
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Trends
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Aerospace
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_____Live Discussion_____
Monday, 3 p.m. ET: Washington Post staff writer David Hilzenrath and editor Mike Flagg will be online to discuss the 2004 executive compensation survey.
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Audio: Washington Post reporter David Hilzenrath discussed executive compensation on WTOP.
_____Local Executive Pay_____
Chart of Highest Paid Executives
Chart of Cash Compensation
How Washington's Corporate Elite Stacks Up (The Washington Post, Jul 16, 2001)
Compensation Glossary
The Methodology
Stock Options No Longer Guaranteed Windfalls for CEOs (The Washington Post, Jul 16, 2001)
CEOs Do All Right, But for Real Money Look to the Stars (The Washington Post, Jul 16, 2001)
Tech Exec Compensation Climbs (Washington Techway, 7/16/01)
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"Our board of directors believes that the involvement of a significant number of Marriott family members in responsible positions of the Company makes a significant long-term contribution to the value of our corporate name and identity and to the maintenance of Marriott's reputation for providing quality lodging products," Marriott said in its latest proxy.

Some companies have purchased stock from insiders in private transactions so large that they could have depressed the stock price or required a protracted series of smaller trades if conducted on the open market.

For example, in October, directors of Varsity Group Inc. approved the company's purchase of 125,000 Varsity Group shares from chief executive Eric J. Kuhn. The transaction, carried out Nov. 4, exceeded the combined volume of shares that changed hands publicly over the preceeding six business days.

The company paid Kuhn $3.75 per share, a 5 percent discount from the average price over the preceding 30 days.

The board concluded it was in the best interest of shareholders for the company to purchase the shares "as opposed to me selling them on the open market," Kuhn said.

Similarly, on Aug. 26, Marriott International bought 750,000 Marriott shares from a company controlled by Richard E. Marriott, brother of Marriott International's chairman and chief executive and a former director of the company. But instead of a discount, Marriott paid the closing price that day, $40.71. The volume was more than the 609,700 shares that traded publicly the following day.

The private transaction was easier and cheaper than trading on the open market and paying brokerage commissions, said Laura E. Paugh, senior vice president for investor relations at Marriott International.

If the company had not bought the shares, Richard Marriott said, he would have sold on the open market and dribbled out the sales. "It would have had no effect on the stock price as far as I know," he said.

The government has taken the approach that the best way to protect investors is to require companies to disclose their related party transactions, allowing shareholders to decide whether specific deals are proper.

Some, like Richson of the Ohio Public Employees Retirement System, say such side deals should always set off alarm bells.

Others like FBR's Timmeny say that view is misguided. He said enforcing a standard of absolute independence would deprive boards of well-informed directors without addressing the core issue. "This is at base a situation that calls for a person to be a person of integrity and character, and if they are that, they will perform properly," he said.

Staff researcher Richard Drezen contributed to this report.


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