The WSJ provides a nice guided tour of executive pay in 2008, stopping along the way to point out CEO’s who received big bonuses despite terrible performances.

It cites a study that found that average executive compensation of non-financial companies fell last year for only the second time in twenty years—by 1 percent. One percent! Now, that number would surely be bigger with financial companies, but it still doesn’t add up.

The rogues gallery of executives is going to need a new wing—stat!

By most measures, 2008 was a terrible year for home builder Hovnanian Enterprises Inc. Its stock plunged 62%, revenue fell 31% and the company posted a $1.1 billion loss in the fiscal year ended Oct. 31.

Yet Hovnanian’s board awarded Chief Executive Ara Hovnanian a bonus of $1.5 million in cash and stock. The reason: Mr. Hovnanian had helped the company stockpile cash, according to Hovnanian’s Feb. 4 proxy statement.

Hovnanian is a dog of a company. Its stock not only lost 62 percent last year, it was down about 80 percent in 2007 and 35 percent in 2006. Grand total, it’s down 99 percent from its peak in July 2005, and it’s at its lowest level since 1984. Heckuva job, Ara!

More:

NYSE CEO Duncan Niederauer got a $4 million bonus despite a net loss of $738 million and a stock decline of 69%. MSCI CEO Henry Fernandez received a $3 million annual incentive payment even though the company’s share price fell 44% and net income declined 16%.

It’s heads they win; tails they win a bit less.

The Journal is also good here to point out that boards have flexibility to skirt pay-for-performance standards and rely on other, hazier reference points.

What happened at Hovnanian shows how some CEOs were able to profit handsomely last year even as their companies — and their shareholders — fared poorly by traditional measures. In some cases, directors also tweaked performance targets to make goals easier to achieve…

boards have a lot of discretion; some use formulas, others rely on judgment. Payouts may also be tied to goals — like retaining executives or promoting diversity — that aren’t related to profitability, yielding awards even when earnings sag.

Boards are far, far too cozy with executives, and it’s an ongoing scandal that the folks who have the ability to change that and to demand lower pay packages don’t do it. I’m talking about the institutional investors, specifically ones tied to the public interest, like pension plans. There needs to be much more focus on how they throw their weight (or don’t) around in these areas.

Here’s one actually doing the right thing:

“Discretion is fine; the problem is when you’re bending over backwards” to make sure executives get awards, said Michael McCauley, senior corporate governance officer of the Florida State Board of Administration, which manages about $123 billion in state retirement funds.

The Florida SBA registered its disapproval of Hovnanian’s compensation practices by voting its 63,353 shares to withhold support from most directors at the company’s annual meeting, to be held Thursday.

Alas, 63,000 shares doesn’t ripple the pond when there are seventy-seven million outstanding. If the Florida SBA had 6.3 million shares, I’ll bet you it would have been paradoxically less willing to take on the company.

The Journal’s done some good bird-dogging of comp issues lately.

Keep it up.

UPDATE: Crain’s New York Business had a good piece on the very same subject matter a week ago.

Amid the deepest economic collapse in generations, corporate America is coming up with a novel way to justify extravagant executive pay: Ignore the bad news.

Companies that sank into the red last year are looking past a host of business expenses, ranging from asset write-downs to higher-than-expected operating costs, to rationalize paying brass even more than they got in flush times. Others appear to be reducing pay but continue to bestow extraordinary perks, such as “golden coffins.”

Nice work.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.