Rich Rewards For the Region's Corporate Elite

· The local companies in the 2004 survey collectively paid their 764 top executives more than $500 million in cash, perks worth $67 million, and $188 million in restricted stock and other long-term incentive payments. Assuming a stock price increase of 5 percent for all companies over the life of the option grants awarded last year, the 764 executives will take in an additional $555 million.

· The median salary and bonus for executives in the survey was $400,583, a 7.6 percent raise from 2003's median. By contrast, the median annual pay for a worker in the Washington area was $37,610 in 2004, an increase of 4 percent from 2003. Including all forms of compensation, the $704,713 median total pay received by the 764 executives in The Post survey was more than 18 times the median annual pay for the metropolitan area.

· The $40.6 million in salary and bonuses taken home collectively by the five highest-paid executives is twice the budget of the D.C. public library system.

Other Kinds of Compensation

The mix of compensation paid to executives changed in 2004, moving from stock option grants and toward more cash, perks and other forms of long-term compensation.

The median option grant for the 100 highest-compensated executives in 2004 was $2.7 million, down 6 percent from 2003. The median salary and bonus, meanwhile, rose 18 percent from 2003, to $1.5 million.

Stock options give executives the right to buy company stock at the price on the date of the grant. If the stock price goes up, the executive can profit from the difference between the market value and his exercise price. For comparison purposes, The Post used an assumed stock price annual appreciation of 5 percent over the life of the option for all the companies in the survey. Some stock may prove to be worth more, while stock options at a company whose stock price declines are rendered worthless.

The median long-term compensation grant -- usually in the form of long-term incentive plan payments or restricted stock grants -- to the 100 highest-paid executives in 2004 was $660,000, more than double what it was in 2003.

Long-term incentive plans typically grant an executive cash for meeting three- to five-year performance goals.

Lucian A. Bebchuk, a professor of law and economics at Harvard Law School who has studied the effect of corporate governance and executive compensation on shareholder value for more than a decade, said the executive numbers in the Washington area mirror national trends.

"In response to a decline in shareholder enthusiasm for options, they've channeled the growth in pay into everything but options," he said. "But it's not at all clear that this move, speaking broadly, has led to a considerable tightening of the pay-for-performance link."

Bebchuk said boards of directors continue to find new ways and new reasons to reward senior executives that have nothing to do with creating shareholder value such as increasing stock price or building market-share dominance or other objective measurements. Rewards go up when value rises, but they tend to remain high even if value falls.

"The structure is what needs reforming," Bebchuk said. "Boards hide behind boilerplate reasons" for increasing pay, such as peer group comparisons, that don't address whether the shareholders have been rewarded. In addition, a range of benefits and payouts, such as severance agreements for executives who are fired or huge pension benefits for executives, often reward executives handsomely even if they screw up.

"If a large part of an executive's career compensation comes from a pension, it decouples their pay from performance of the company," he said.