The independent consultant…

Lately, there’s been a lot more attention paid to the role of so-called independent consultants and how they have helped to create an environment of runaway compensation. On April 10, Gretchen Morgenson explained in detail in the NY Times (no link since it’s premium content) about the conflicts that exist with compensation consultants. Indeed, a fair number of the letters received by the SEC on its executive compensation proposal noted the inherehent conflict of interest.

Against this backdrop, the proxy filed by consulting firm Heidrick & Struggles (HSII) late yesterday seems particularly interesting. That’s because in the summary compensation chart under "all other comp" we find that Chairman and CEO Thomas Friel received $17.6 million, or nearly 30 times his annual salary of $600K. Following the footnotes and tracking back through previous filings, we find that $17.2 million was related to shares of Google (GOOG) stock that the company received back in 2001 in exchange for consulting services. As an earlier 8-K notes, Friel was the team leader on the project that netted the company $128.8 million and as a result received 25% of the 55% of the consultant team’s share of the proceeds, which worked out to just under 14% of the proceeds. Though the shares were sold shortly after Google went public at an average price of $108 a share, Friel deferred his compensation until 2005, which is why it’s in the current proxy.

It’s not entirely clear what services Heidrick and Struggles provided to Google back in 2001. Earlier filings describe them as recruitment fees. While the Google deal is probably not a typical fee — and in hindsight, Heidrick and Struggles would have done much better by holding on to the Google stock — is it any wonder when independent consultants continue to give their seal of approval to runaway compensation?