Excellent Year for Executives

"Clearly when it comes to performance-based awards, there needs to be some very direct and measurable quantitative criteria," said Ann Yerger, director of research at the Council of Institutional Investors, which represents large pensions and other funds. "And even that can be risky. What's the appropriate amount to pay based on the return? There is no magic formula or strategy. Our members have no problem with large payments if they are really based on sustainable long-term performance."

Yerger and other corporate-governance advocates also criticize stock grants restricted only by an executive's promise to remain with a company for a set period of time. The critics say these restricted stock grants, derisively referred to as "pay for pulse," allow executives to capitalize on a long-term market upswing rather than any especially deft management.

Compensation consultants say restricted stock grants are increasingly popular but that boards are feeling public pressure to add more specific performance criteria.

Daniel P. Moynihan, a consultant at Compensation Resources Inc. in New Jersey, said he had just been retained by a big company negotiating a contract with a chief executive who had been promised a grant of 3 million restricted shares with the caveat that there would be strict performance criteria attached. "Now we are trying to get our arms around exactly how to do that," Moynihan said. "How do we not just hand out stock for the executive being there but for strong short and long-term performance?"

Members of the compensation committee at Viacom declined requests for interviews on the size of the Redstone's salary and bonus. A corporate spokesman pointed to the company's proxy statement. The proxy said Redstone was rewarded for "achieving record operating results in an extraordinarily difficult environment." The company reported earnings growth of 9.5 percent for the year not including nonrecurring charges.

Similar language crediting chief executives with navigating rocky economic waters appears over and over in 2003 proxy statements.

Henry R. Silverman, chief executive at diversified services company Cendant Corp., parent of Coldwell Banker and Century 21 realty companies, scooped up $11.4 million in salary, bonus and other payments for steering the company through a "difficult economic environment." Cendant's share price dropped 47 percent in 2002

Home Depot Inc. chief executive Robert L. Nardelli picked up $11.2 million in salary, bonus and other payments for his continued "superior leadership and vision" during "very difficult economic times." Home Depot's stock dropped 53 percent in 2002. Nardelli's compensation included $2.5 million for forgiveness of a corporate loan and $2 million more for related tax payments.

The Corporate Library report also looked at the significant number of chief executives who declined salaries, bonuses and other payments in 2002 because their companies performed poorly.

At Rational Software, for instance, Michael T. Devlin's compensation was cut by nearly 50 percent and his bonus was eliminated. At Comverse Technology, Kobi Alexander "voluntarily waived his right to approximately $1,955,000, which is 90 percent of his salary and bonus, in support of cost-reduction steps taken by the Company," according to the company's proxy statement. Other companies where chief executive's salaries and bonus were cut or eliminated in 2002 include BroadVision Inc., Molex, Alcoa Inc. and Agere Systems Inc.

The study also looked at profits earned through the exercise of stock options in 2002. Critics of measuring this figure as a component of annual pay say it reflects options awarded in earlier years. Supporters of its inclusion say it represents money that went into an executive's pocket in a given year. According to the study, 381 executives exercised options generating a median profit of $1.4 million, down from $1.6 million in 2001.

Topping this year's list was Jeffrey C. Barbakow, former chief executive of Tenet Healthcare Corp., who sold shares worth $111 million. Barbakow resigned in May amid questions about how Tenet billed Medicare patients. Those questions have punished the company's stock price. Tenet compensation committee board members did not return calls for comment.

Harry Anderson, vice president for corporate communications at Tenet, noted that Barbakow exercised the options 10 months before the questions came to light. Anderson said that at the time Barbakow exercised the options, which were granted in previous years, he was not aware of the extent of the billing problems. He also noted that Barbakow continues to have a large equity stake in the company and that the options he exercised were close to expiring.