of the case, but could not record any significant information except whether the case involved a stock option, bonus, or other form of incentive compensation. Therefore, reports concerning the Branch's activities were generated manually within the Branch.

When a submission was received involving a new or modified plan, the adjudicators reviewed the plan to determine whether it conformed with the regulations. The adjudicator had to ascertain the total amount of compensation paid in the base year of the plan. This amount could then be increased each year by 5.5 percent subject to several complex adjustments. One such adjustment involved allowing for different numbers of participants being included in the plan in different years. When the adjudicator, who was generally an experienced economist or consultant, had collected enough information from both the firm's original submission and information solicited subsequent to the filing, he recommended a decision on the case in consultation with the Branch Chief.

When the proposed plan or modified plan appeared to be within the Program's standards it was generally approved. In cases where the new plan provided for increases greater than the Program's standards the Branch Chief and the adjudicator considered the evidence submitted justifying the request. It was not uncommon for firms to argue that they were losing managers to other area firms that had more attractive plans. The Branch Chief and the adjudicator determined whether the inequities which existed were sufficient to warrant the granting of an exception.

The adjudicator then wrote a Decision and Order either approving the plan and stating conditions of approval in cases where the plan was clearly within the Program's standard, or where the evidence was sufficient to warrant an exception. He disapproved the plan when it exceeded the Program's standard unless the applicant had demonstrated sufficient justification for an exception. In Phase III the Decisions and Orders were approved and signed by the Branch Chief. In Phase IV the Decisions and Orders approved by the Branch Chief received final approval and were signed by the Administrator of the Office of Wage Stabilization.

If the Branch determined that a plan was not consistent with. the regulations and disapproved it, the firm could appeal the decision. The procedure for reviewing appeals for Executive Compensation cases was different from the Food, Health and Construction areas. A tripartite committee was neither necessary nor appropriate since the decisions made did not involve organized labor to any extent. At the beginning of Phase III, the Category III panel which had been hearing appeals on IRS cases reviewed Executive Compensation

cases. But this was replaced by a procedure whereby adverse decisions by the Branch's staff were subject to hearings. Any firm that received an adverse decision could request a hearing. The hearing was attended by representatives of the firm and two or three members of the staff of the Executive Compensation Branch. After the hearing, the staff decided whether to modify the decision, based on new information presented by the parties, or let it stand.

Phase IV Changes

The process whereby submissions (either reports or exception requests) were reviewed and decided remained essentially the same throughout Phases III and IV. However, revisions in the Executive Compensation Regulations which became effective during Phase IV expanded the responsibilities of the Executive Compensation Branch.

Phase IV Executive Compensation Regulations required every firm governed by the Economic Stabilization Program to designate an Executive Control Group-the analogue of an employee unit for other wage standards. This included both controlled and self-administered firms. These groups were established to keep track of increases from salaries and compensation plans received by the top executives of the nation's firms. It was alleged by several sources that the rate of increase among executives was well above the 5.5 percent standard, and the new regulations were formulated to deal with this problem. The regulation required firms with over $250 million in sales to submit a CLC-35 indicating that the amount of compensation paid to each Executive Control Group was either within the Program's standard or within the amount granted to the firm on an exception request. The CLC-35 form covered salary compensation and Schedule A of the form covered remuneration from incentive compensation plans (See Appendix VIII). Firms with between $50 million and $250 million in revenues had to keep records of compensation paid to Executive Control Groups. Firms with less than $50 million in revenues simply were required to set up Executive Control Groups with the responsibility to file for an exception if the group compensation was in excess of the standard. It was the responsibility of the Executive Compensation Branch to check the CLC-35 forms to verify that the Executive Control groups were in compliance with the regulations.

Self-Administered Industries Division

The Self-Administered Industries Division, which had a staff of about 20 professionals, had two tasks during Phases III and IV. The

first job was to monitor wage increases in those sectors of the economy which were not under mandatory wage controls and to identify wage settlements in those sectors which might be challenged on the grounds of being "unreasonably inconsistent" with the Program's goals. The Division's second task was to complete Phase II cases relating to firms in the non-mandatory sectors. These latter cases took a great deal of the Division's time in the early months of Phase III. The procedures used in processing Pay Board cases did not vary significantly from those used in Phase II.

The job of monitoring wage increases and issuing challenges was accomplished in several stages. The first step involved identifying significant wage settlements, as they were reached. The timing in identifying potentially challengeable pay adjustments was critical. It was essential for the Council to act promptly if it wished to issue a challenge. The most preferable circumstance was to be able to issue a challenge and a temporary order to prevent the implementation of an increase while the Council determined the acceptability of the increase. The desirability of this procedure was important for maintaining relations with the labor community. Also, from a standpoint of simple equity, the Council staff was reluctant to cut a man's wage after he had received an increase.

Generally, however, the reporting requirements for self-administered industries did not permit the Division to identify wage increases in a timely fashion. The only employee units which had to report were those with 5,000 or more employees and these groups were not required to report until ten days after an increase had been implemented. To compensate for this lack of information, the Economic Analysis Division of OWS first contracted a clipping service which gathered all the information available in the newspapers about significant labor settlements. This function was assumed by the Self-Administered Industries Division in Phase IV. By reviewing the newspaper clippings the staff became aware of the companies involved in negotiating new settlements, their locations and the unions involved and could perhaps intervene before a rollback might be necessary.

The staff then decided which of these settlements should be written up in the Council's "Pay Watch." This was an internally circulated document discussing important labor settlements. The criteria used in selecting settlements for the "Pay Watch" were: (1) size of the unit, (usually over 500); (2) size of the settlement (the Division took the 5.5 percent standard into account but it was not a "magic" number; (3) significance in the industry; and (4) significance in the local labor market.

There were no hard and fast quantitative cutoffs used in applying these criteria and the criteria were interdependent. For example, a six percent increase might be listed for a large unit while the same increase might not be listed if the unit was small and was not a "leader." Before preparing a summary of the settlement for the "Pay Watch," the staff contacted the parties involved for detailed information about the settlement, in order to verify the newspaper account and to obtain information which was not available in the newspaper.

About half of the firms listed on the "Pay Watch" warranted further investigation and detailed analyses were prepared in order to determine whether the increases should be challenged. Thse case summaries were prepared on roughly 200 firms during Phases III and IV. The criteria used in deciding which settlements warranted further investigation were the same as those used in placing settlements on the "Pay Watch." The difference was that the criteria were applied more vigorously and only those settlements where there was a possibility of a challenge were pursued.

For those settlements which were to be analyzed in depth, the Division requested the firms to submit a PB-3 form, details of wage and benefit improvements provided in the settlement, and justification for the increase such as historical relationships, comparisons to other firms in the area, and a summary of the wage increases granted over the past five years.

The case summary included such factors as size of the adjustment, impact on the industry and local labor markets, possible productivity gains, and bargaining relationships with other units. The staff could make a recommendation as to whether to challenge the adjustment or not. The cases which the staff considered as potentially challengeable were discussed with the Administrator of the Office of Wage Stabilization, who in turn discussed these cases with the Director. At this point, a decision was made whether to challenge the increase, to attempt to informally persuade the parties to lower the increase, or not to challenge the proposed increase. About 25 challenged situations were handled in Phases III and IV. In several cases where a challenge was issued and the firm had not yet implemented the increase, the Council also issued a temporary order prohibiting payment of the increase until after a hearing had been held on the challenge and a decision had been rendered. The challenges and orders were drawn up by the staff of the Self-Administered Industries Division and signed by the Administrator of the Office of Wage Stabilization.

Hearings were held in all cases which were challenged. These hearings were conducted by Cost of Living Council officials. A hearing officer was selected by the Council's Director on a case-by-case basis. Following the hearing, the hearing officer presented written recommendations to either the Administrator of the OWS or the Director of the CLC. A decision was then made as to whether the challenge would be withdrawn or whether the staff would prepare a final Decision and Order denying portions of the proposed increase or delaying the date of implementation.