Anew set of corporate scandals is calling attention to executive compensation. Fannie Mae has just announced a $400 million settlement with the government to pay its debt to society for what is at heart an executive compensation scandal. Meantime, investigations underway at the Securities and Exchange Committee and the Justice Department are casting light on some allegedly less-than-legal compensation practices at a bevy of firms.

Fannie has been at work for several years recalculating its earnings to correct for $11 billion in errors on its financial statements between the late 1990s and 2003. The incorrect filings were designed to make Fannie appear more profitable as a way to boost performance-based compensation for its executives. In this way, one such executive, a Clinton-era White House budget director, Franklin Raines, “earned” bonuses worth $52 million between 1998 and 2003. The Office of Federal Housing Enterprise Oversight released a report yesterday describing the earnings statements on which those bonuses were based as “illusions deliberately and systematically created by senior management.”

Another sort of illusion may be at work in the other current executive compensation scandal. Some companies may have gamed the system to inflate the value of options grants to executives. Regulators are investigating whether the firms altered the dates on paperwork to make it look like options had been granted on days when the stock price was lower than the days on which the options were actually granted, thus making the options more lucrative. New “suspects” are still coming to light. An analysis just performed by the Wall Street Journal appears to have uncovered five more companies that could have played the game.

These two scandals share two important elements. First, the behavior in question was against the rules that were already in place. Second, that appears not to have mattered because the executives involved seem to have been somewhere on the other side of honest. Dishonesty, not faulty corporate governance rules, created the Enron and WorldCom debacles.

That message was lost on Congress in 2002 when lawmakers passed Sarbanes-Oxley, and Democrats haven’t learned. Witness a hearing set for Tuesday in which Democrats on the House Financial Services Committee will probe executive compensation as a way to plug Rep. Barney Frank’s Protection Against Executive Compensation Abuse Act. The bill seeks to improve disclosure of executive compensation to shareholders, but it would go further than a proposed rule with the same goal being discussed at the SEC right now. The Democrats would only cloud issues for investors.

Feature one popular form of compensation, the use of company jets when they are not needed for business functions. The SEC rule would require disclosure of the “incremental” costs of such travel – the fuel and pilot hours for particular personal flights. The Democrats would consider the full purchase price of the jet to be executive compensation, even though much of that price would actually be a non-compensation business expense. So which methodology gives the clearer picture of how much top managers are making?

Executive compensation is in the news because some dishonest CEOs broke existing rules, while others in industries everyone loves to hate, like big oil, happen to be making a lot of money perfectly legally. If Congress latches on to this latest round of scandals as an excuse for even more regulation, the results could prove devilish indeed. There is one area of compensation that does need to be made more transparent to ensure that benefits and tax sheltering and other forms of hard-to-cost-out compensation are accounted for – and that’s the compensation paid by taxpayers to members of the United States Congress. If compensation is going to be fair game, let’s open it up for them.