American corporate executives can suddenly expect more resistance when they ask for a private Lear jet, a prewar five-bedroom apartment on Fifth Avenue, or a top-of-the-line Jaguar with an private driver.
While liberal groups have long hammered at the high paychecks and perquisites garnered by corporate executives, momentum for reform is now coming from government watchdogs, shareholders, and business groups themselves.
The trend coming in the context of an economic downturn and corporate accounting scandals caps an era when American chief executives rode as high in popular esteem as the booming share prices of their companies.
"The days of unlimited and unquestioned perks are coming to an end," says Scott Klinger, co-director of Responsible Wealth, a Boston group that has decried "excessive" executive compensation for years.
In some respects, the current tension over executive pay represents a clash of two fundamental American values: populist egalitarianism and the right to a just reward in a capitalist system.
For years, CEO pay has soared on the economic rationale that companies are competing for the best talent and rewarding those who deliver top-flight leadership.
But several years of economic slowdown and worker layoffs have shifted the balance toward populist outrage: Respect for CEOs is sagging amid revelations such as the special retirement benefits General Electric gave former chief executive Jack Welch.
The alleged rapacity of Tyco executives has further damaged their image .Former CEO Dennis Kozlowski has been indicted by the Manhattan district attorney, and the Securities and Exchange Commission (SEC) in Washington has filed a civil case against him. He is charged with a host of abuses, some in regard to 200 loans from the company totaling $274 million. Most of the money was used for homes, yachts, furniture, and domestic help.
One indicator of Kozlowski's imperial style: A $2.1 million birthday party for his wife, with Tyco picking up half the tab for the Roman-Empire-theme event on the Italian island of Sardinia.
Now establishment groups are urging pay restraint. For instance, a blue-ribbon commission of a New York business group, the Conference Board, yesterday stated that "something has gone wrong" with high CEO pay at a time when there is so much "public anger at misconduct." These CEOs have "breached the compact" underlying capitalism, the commission's report stated.
In the high-profile case of General Electric, the company announced Monday that the SEC has started an informal investigation into the compensation deal given to Mr. Welch. The day before, at Welch's request, GE's board cut his retirement benefits to include only office space and administrative support.
The package, according to court papers, had included access to corporate aircraft, seats at sports events, and use of a New York apartment owned by GE.
In a Wall Street Journal opinion-page column, Welch said Monday that his GE contract had been "grossly misrepresented" by his wife in divorce-court proceedings. He didn't spell out details.
As chairman of GE for 21 years, Welch multiplied the size of the company, his own fame, and his checkbook, raising his net worth toward the $1 billion mark. "Like it or not, the ideas of General Electric's fiery CEO are defining the nature of business in our age, and revolutionizing the art of management," proclaimed a 1993 book on Welch.
Not everyone agreed. At the 1999 GE annual meeting in Cleveland, Mr. Klinger of Responsible Wealth supported a resolution establishing a maximum ratio between the highest-paid employee (Welch) and the lowest paid. He also mentioned a Business Week study rating Welch as the fifth-worst CEO in terms of delivering value to shareholders relative to his $83.6 million pay.
When Welch defended his pay by claiming credit for the growth of GE with the pronoun "I," Klinger asked whether the hundred of thousands of other employees had much to do with it. Welch changed the "I" to a "we" and cut off Klinger's microphone.
"He didn't appreciate being challenged," says Klinger.
But the resolution didn't pass, as Mr. Klinger expected.
A study by Klinger's group last month found that CEOs at 23 companies under investigation for accounting fraud made an average of $62.2 million during 1999-2001, 70 percent more than CEOs at comparable companies with clean records.
Last year the average CEO of a major company got 411 times the pay of the poorest-paid worker. Thanks largely to falling stock prices, and their impact on stock options, that's down from 531 times in 2000. But if the average annual pay of a production worker had grown at the same rate as CEO pay since 1990, that worker would have earned $101,156 in 2001 not the $25,467 he or she actually got.
Liberal groups have long disapproved of this disparity. They also questioned the merit of CEO claims that they individually filled corporate and shareholder coffers with billions of dollars.
William McDonough, president of the Federal Reserve Bank of New York, last week called on executives to cut their pay, calling the big jump in their compensation in recent decades "terribly bad social policy and perhaps even bad morals."
The giant pay packages, often for CEOs of companies which are doing poorly, "are not fair," says Anita Green, research director at Pax World, a socially responsible mutual fund in Portsmouth, N.H.
Yet for years, Ms. Green notes, Pax World's efforts through proxy votes to limit CEO pay got nowhere. "Our message was falling on deaf ears," she says.
But now, "directors are feeling more empowered to challenge management, and that would include executive compensation."
This week, the SEC will consider requiring mutual funds and other investment managers for the first time to disclose how they vote shares in their portfolios in corporate proxy contests.
If the SEC approves the requirement, it could put additional pressure on directors to be tighter on executive compensation, including perks.
For now, corporate boards and others are proceeding with awakened vigilance. The test of any new standards may come when the stock market rebounds and CEOs again grace magazine covers with smiles, not handcuffs.