Designing executive pay packages has been called a dark art. Chief executives want to know how much the competition is getting, what kind of exotic stock option or performance bonuses they should expect, and what will happen if activist shareholders or boardroom rivals orchestrate a putsch. Developing a good package that satisfies everyone’s needs and stands up to shareholder scrutiny is rarely appreciated outside the boardroom. That's sometimes even true inside the boardroom, as some boards are, paradoxically, turning on the very compensation consultants they’ve relied on to help them find the right mix, accusing them of irresponsibly pumping up compensation levels. Still, companies are keeping compensation consultants on the payroll. As a result, the industry has grown from a handful of firms two decades ago to 50 or 60 today, with consultants tapping their creativity to engineer pay packages. We searched the landscape of executive-pay firms—boutiques such as Frederic W. Cook & Co. and Exequity and megafirms such as Mercer, Watson Wyatt, and Hewitt—to find three individuals who reflect some of the current trends in compensation consulting.

The Innovator
Frederic W. Cook, the founding director of Frederic W. Cook & Co., has been referred to as the dean of executive-compensation consultants. Over 40-plus years in the business, he has represented some of corporate America’s biggest names, such as American Express, Procter & Gamble, and General Electric. “He was one of the first ones in and is the most highly respected,” says Broc Romanek, a former Securities and Exchange Commission lawyer and the editor of CompensationStandards.com. “He’s always been at the forefront.”

Sometimes the spotlight can be glaring. In a 3,298-word front-page story last October, New York Times business columnist Gretchen Morgenson noted that Cook had advised Tyco, Computer Associates, and Pfizer, all of which have had scandals related to executive pay or benefits in recent years. She also credited Cook and his colleagues at Cook & Co. with “creating more wealth for executives over the last 20 years than any other pay advisers.” Many in the industry say that’s giving Cook, a venerable numbers whiz, a little too much credit. But he did pioneer some widely used compensation practices that have helped dramatically increase pay, including a type of stock option called the “reload,” in which the options automatically replace themselves once they are exercised, growing in value each time the strike price rises. (Reload options have recently fallen from favor because of new accounting rules.)

In recent months, Cook has taken the lead in defending executives against charges of inflated pay. He teamed up with the pro-corporate lobbying group Business Roundtable on a study that justifies high pay for execs, and he testified before Congress. “The media,” he told lawmakers in 2006, “has been flooded with a multitude of distorted, misleading, and oftentimes erroneous statistics chosen to portray U.S. C.E.O.’s and board governance in a negative light.”

Cook and his colleagues, through a spokesperson, declined to comment for this article. “They want to basically stay away from the executive-compensation issues and just kind of be a little bit low-key,” the spokesperson explained.

The Rebel
Jeffrey Hyman knows the world of marquee firms well. For three decades, he worked as an executive-compensation consultant at Hewitt. Now he routinely takes his old company and others like it to task for perceived conflicts of interest when they perform various services for the same client—an issue popular among critics of compensation consultants, in Washington and elsewhere. In many cases, the same executives whose salaries these consultants evaluate control much more lucrative contracts to manage employee benefit programs and other services, which could benefit divisions of the companies who provide the compensation consulting. Hewitt is the type of company that could find itself in this situation, although a Hewitt spokesperson says it has strict policies in place to ensure objectivity. Hyman defected from Hewitt this March to join three other colleagues at the newly founded Exequity, and he has quickly become a loud advocate for independence in executive-compensation consulting. Hyman says he left his old company amicably, but “saw the writing on the wall” and wanted to get out before the conflict-of-interest controversy hit the industry.

The new firm, which launched last August and also employs two former bigwigs from the human resources firm Buck Consultants, aims to capitalize on the environment of increased scrutiny and shareholders’ growing demands for reform. Unlike the larger firms, Exequity has no intention of angling for other human resources work. Independence, Hyman argues, “is a big issue, and it’s going to get bigger.”

“If you talk to the big firms, they’ll say, ‘We have policies and procedures in place to ensure independence in the consulting process,’ ” Hyman says. “But if you’re skeptical of what goes on in boardrooms, that explanation isn’t going to cut it.” Even if a compensation consultant is not involved in or is unpaid for procuring contracts for other parts of the company, it “doesn’t mean he’s unaware that if he gives advice that is favorable to a C.E.O. that isn’t going to help get more business,” Hyman argues.

John England

The Establishment Man
As the head of the executive-compensation-consulting division at human resources powerhouse Towers Perrin, John England is perhaps one of the best-known members of the establishment. England estimates that he and his team at Towers Perrin control about a quarter of the expanding compensation-consulting market. “It’s a busy time for everybody,” England says.

Yet England’s fiefdom is just one small department in a mammoth human resources firm. That puts him squarely in the middle of the controversy over the alleged conflicts of interest. Here, too, his consultants are finding ways to beat back the onslaught of complaints and gain credibility with the reformist crowd.

In recent months, Towers Perrin has introduced a practice of encouraging its clients to analyze, as part of a tally sheet, the wealth their executives have amassed. “The idea is that the boards will often have a ‘holy cow’ moment because they don’t realize how much their executives have already accumulated,” says Jesse Brill, publisher and editor of the Corporate Counsel, who has followed executive-compensation issues for about 30 years. “The hope is that this will temper the committee’s desire to keep up with the survey data—the Joneses—because it will have an appreciation of just how much it has already paid out.”