A new study may offer more ammunition for those seeking to overhaul compensation practices at financial institutions: Despite their poor financial performance, CEO and CFO pay at more than 100 banks receiving Troubled Asset Relief Program funds didn't decrease accordingly, according to compensation consulting firm Presidio Pay Advisors.

"Collectively, rather than paying for performance (and its corollary, not paying for poor performance), banks paid their executives independent of performance," the study states. "While absolute pay levels at many banks have dropped, changes in pay are randomly distributed, with no systematic, measurable link to differences in banks' performance."

Among 115 banks that each received at least $50 million in TARP investments, more than 90 percent generated negative shareholder returns since 2006. Despite the negative returns, 29 percent of the CEOs who held office from 2006 through the end of last year received increases in 2008 total cash compensation (base salary plus annual bonus) ranging from 1 to 108 percent over 2006 levels. Thirty percent of those CEOs received increases in 2008 total direct compensation (total cash compensation plus the value of long-term incentives granted) of 4 to 174 percent over 2006 levels.

Meanwhile, 37 percent of CFOs received increases in 2008 total cash compensation of 2 to 76 percent compared to 2006, and 43 percent received increases in 2008 total direct compensation of 2 to 420 percent over the same period.

"There seems to be a disconnect between stated performance philosophies and pay decisions," said Dave Bisson, a senior consultant at Presidio Pay Advisors. "As performance deteriorated in 2007 and 2008, many Compensation Committees reset performance targets, paid discretionary bonuses, excluded unusual or one-time charges from bonus calculations, or increased long-term incentive grants for retention purposes. These actions are inconsistent with paying for performance."

Compensation Committees also approved increases in the size of equity grants to offset lower stock prices, according to the study. Total stock options granted to CEOs increased from 6.5 million in 2006 to 11.1 million in 2008, more than offsetting a drop in restricted stock grants from 2.6 million shares to 1.8 million over the same period. Total stock options granted to CFOs increased from 2.2 million in 2006 to 3.5 million in 2008, combined with an increase in restricted stock grants from 0.42 million shares in 2006 to 0.65 million in 2008.

The full study is available for free with registration here.