The retiring CEO of health insurance company Aetna walked away with $72 million in total compensation for 2010 alone, after just five years in the job. That's on top of the $85 million CEO Ron Williams recieved in the previous five years–including $38 million in 2008. Every penny of that ultimately comes from the pockets of Aetna's policyholders–and its shareholders, because lavish stock options and share grants dilute the value of shares bought on the open market.

A chunk of this grossly outsized compensation also comes from Aetna's other employees. Here's an insider view from the comments on the Hartford Courant story about Williams' pay:

This news may be used as the textbook case of the cause of nullifying of the middle class in general and the dimunition of lower-echelon employees at Aetna who have seen their bonus programs, traditional pensions, stock options grants, retiree health care premiums, etc. scaled back or eliminated.

Aetna's policyholders should be just as angry.

There's a growing body of thought among smart investors that this kind of grossly outsized executive compensation is the mark of a company more intent on enriching its top insiders than serving shareholders–much less its customers. Some investors are putting such measures right beside profits when deciding to buy a stock.

From Gretchen Morgenson'y NYTimes column Sunday:

SOME people say it doesn’t really matter how much companies pay their executives, at least as far as the shareholders are concerned. Whether investors prosper depends on the executives’ management skill, not on penny-ante items like pay, this argument goes.

To this, Albert Meyer, a money manager at Bastiat Capital in Plano, Tex., responds with a resounding “phooey.”

Executive pay is not only a sign of how a company views its duties to shareholders, Mr. Meyer says, but it is also a crucial tire to kick when making investment decisions.

“When compensation is excessive, that should be a red flag,” Mr. Meyer says. “Does the company exist for the benefit of shareholders or insiders?” … Companies he avoids include those that award oodles of stock or options to their executives. Such grants vastly dilute the earnings left over for a company’s owners: its shareholders

As investors scan corporate proxy statements this spring and prepare to vote in annual elections for company directors, executive pay is again moving to center stage. After a few years in the wilderness, top executives are getting hefty raises, according to Equilar, a compensation analysis firm in Redwood City, Calif. But while outrage over executive pay has been eclipsed in recent years by anger over the causes and consequences of the financial crisis, compensation issues still resonate among many investors.

Mr. Williams' compensation is full of red flags. It's just one more reason that states can't let insurance companies keep charging double-digit premium increases without any way to tell them no. California in particular has gone along with the insurance lobby for years. Legislators who know better need to resist for once, and give the state's Insurance Commissioner  power to deny or modify the grinding year-over-year health premium spikes that are making millions more people uninsured.