Last week, as the keynote speaker at the Fourth Annual Fox Business School Conference on Executive Compensation at Temple University, he said the growing scandal of options back-dating, involving some of the nation's most well-known companies, has already led to many senior management firings and resignations, with more to come.

"It's really sickening to see so many fine companies plagued by such tawdry conduct," he told his audience. "Violations of federal securities laws are rampant in these activities along with violations of state corporate fiduciary duties. Options must only be issued for their fair market value -- the closing price on the date of the grant."

Pitt, now CEO of the Washington-based business consulting firm Kalorama Partners, noted that back-dating usually renders a company's proxy materials false and misleading and often creates serious problems with the IRS. "More fundamentally," he pointed out, "the financial statements of a company at which back-dating occurred often require restatement."

He said that the practice would also provide additional support for legislators who oppose fixing Sarbanes-Oxley, a law he believes was "hastily and badly drafted and suffers from multiple deficiencies. While there is a real need to refine Sarbanes-Oxley -- at minimum, its one-size-fits-all philosophy should be modified and ameliorated -- but this unfolding scandal will give opponents of change a very powerful counter argument."

Stating "no one should have any objections to paying large amounts of money to men and women who run modern corporations, "but only if they perform," the former SEC chairman, nonetheless, favors expensing options, but when and how they are expensed remains critical. "Too few companies have spent enough time considering ways they can come up with a valuation methodology that actually produces realistic results," he added.

Reviewing basic standards for determining appropriate executive compensation packages, Pitt praised the SEC's new rulings requiring full disclosure and simplified plain English descriptions.

Pitt emphasized that compensation committees need to precisely identify "criteria and objective standards for each senior manager to achieve; articulate how they will assess whether those criteria and standards are being met; and then justify the compensation they offer for management's performance."

Industry leaders, he said, "can build enormous credentials for themselves if they take the initiative and address the SEC's real concern that companies spell out objective standards for determining compensation. These same leaders will do themselves a tremendous disservice if they simply try to craft more legalese that complies with the letter of the regulations, but misses the spirit."

Although questioning the way that many compensation consultants actually provide advice to their clients, he said they still provided a useful and often necessary service. However, he proposed that "they should be paid only for real performance not the mechanistic processes many utilize" that routinely come up with inflated numbers.

Pitt also argued that to achieve fair and equitable executive compensation packages, "the accounting profession must revisit its standards. If companies are manipulating their documentation, it's unlikely accountants will find it, no matter how bright or diligent," he said, adding, "But, the considerable breadth of this problem to date suggests that auditors need to spend more time with their audit clients identifying critical controls, and then evaluate how well those controls are applied, and how easily they can be avoided."