Some CEO pay cuts

Also, important voices in politics, regulation, the investment community, and the corporate world itself are calling for changes in the executive pay system to bring greater moderation.

Senator John McCain (R) of Arizona, for instance, says top executives should be required to keep much of their own company stock for as long as they hold their jobs. The idea is to make CEOs think long-term.

The Business Roundtable, an association of 150 top CEOs, has dropped its opposition to a New York Stock Exchange proposal of last month that companies seek shareholder approval for new stock-option plans. The Big Board proposal is expected to win approval of the exchange's members Aug. 6. Companies listed on the NYSE would then have to comply.

Last year, CEOs of firms that chopped 1,000 or more workers from their ranks saw their average pay and bonuses drop from $3 million in 2000 to $1.8 million last year, according to Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies.

However, the AFL-CIO found that median pay (rather than average) grew in 2001 by 7 percent – meaning half of all executives made more and half made less. Some two dozen elite corporate chiefs took pay cuts, lowering the average. But the majority of CEOs still got raises – "despite flagging corporate performance," says William Patterson, director of the labor group's office of investment.

In some cases, boards gave CEOs extra valuable stock options to offset cuts in bonuses. Cisco Systems CEO John Chambers took only $1 in base salary, but got a huge option grant.

Other groups are calling on corporations to list new stock options as an expense on their books. Expensing options would not only discourage huge grants to executives. It would make corporate books give a more accurate picture of a firm's financial situation, proponents maintain.

Long-time critics of soaring executive pay are encouraged by these developments. For the first time in a decade, they see a chance that the rich compensation packages that exploded in the 1990s may subsiding now.

"There is a narrow window for attention," says Chuck Collins, program director at United for a Fair Economy, a Boston group.

President Bush, concerned about fall elections, spoke about executive pay in his speech Tuesday on corporate responsibility. He called for CEOs to comply with the spirit of existing disclosure rules by explaining how their compensation packages are in the best interests of their companies.

One complaint from critics is that Bush didn't call for requiring companies to expense new stock options against revenues. Options have been the biggest factor pushing CEO pay in big corporations to 458 times the wage of ordinary workers.

Percentage gains during the period from 1990-2001:

Chief executive pay 463 %

S&P 500 stock index 248 %

Corporate profits 88 %

Worker pay 42 %

Inflation 36 %

Source: Institute for Policy Studies and United for a Fair Economy

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