Ira T. Kay dispelled numerous myths about executive compensation in his presentation, "Stock Incentives: Moving Toward a Portfolio Approach," delivered Monday at WorldatWork's Annual Conference and Exhibition in New Orleans.

Kay, practice director of compensation consulting at Watson Wyatt Worldwide, began by hitting head-on the myth that executives are overpaid. He argued that you may not like the salaries executives receive, but there is a market for executives at that price and the market is reasonably well run. Kay does not believe that the market is flawed, as some contend. A flawed market woud allow executives to set their own pay, but Kay said that this is not what is happening out there.

Second, people often argue that CEOs are paid not only for success, but also for failure, because upon termination they receive huge severance payments. Kay said that you may not like this either, but if a company is going to recruit top executives, it will have to protect those executives on the downside -- otherwise, a company's recruiting efforts will be in vain.

A third myth is that there is no real pay for performance, because when performance goes down, executive pay still increases. Kay argued that this actually is not true. His research shows that when performance goes down, pay also decreases.

A fourth myth that Kay dispelled is that executive pay only increases, and does not decrease with a downturn in the market or company performance. Kay cited the years 2001-2002 and 2002-2003 to demonstrate that overall executive pay can actually decline, and does not continually increase.

Last, Kay argued against the myth that American disclosure rules are inadequate by pointing out that, while Canada and the United Kingdon do indeed have better disclosure rules than the United States, ours are not far behind, and we are heading in the right direction.

More coverage of WorldatWork's 50th annual conference and exhibition is available in our special section.