Half of S&P 500 CEOs Topped $8.3 Million

Michael Dell at the Oklahoma State and Texas basketball game in Austin, Monday, Feb. 12, 2007. Associated Press reporters and editors have surveyed proxy statements for most of the S&P 500 companies to provide a full picture of executives' compensation - including stock options, bonuses and perks such as country club memberships. (AP Photo/LM Otero) (Lm Otero - AP)

The AP formula, developed with advice from pay consultants Pearl Meyer & Partners and Mercer Human Resource Consulting, adds up salaries, bonuses, perks, above-market interest on pay that is set aside for later and what companies estimated the present value to be of restricted stock and options awards on the day they were granted last year.

This differs from the summary compensation formula that the SEC requires companies to use in proxy statements. Some executive pay consultants say the SEC formula is of less value to investors because it includes expenses that companies recognize during the year for current and previously awarded stock grants.

That tends to overstate in some cases, and understate in others, the specific pay decisions boards of directors took during the year, they said.

SEC Chairman Chris Cox told the AP that the SEC is looking at the statements it receives this year and could change the rules going forward.

No matter which formula you use, Yahoo CEO Semel's total illustrates one of the most pronounced recent trends in executive pay: Salary and cash bonuses account for only a small portion of total compensation. Almost all of his pay _ $71.4 million _ came as stock grants and stock options, according to AP calculations. His salary totaled only $250,001.

Plus, the eventual payouts from stock options handed to CEOs could be substantially higher in future years if the overall market keeps floating most stock boats higher.

Consider the case of Occidental Petroleum's Irani, who topped a separate Top 10 list of executives who exercised previously awarded stock options, compiled for the AP by Capital IQ, a division of Standard & Poor's. His net gain, before taxes, on shares he exercised in 2006 was $270.2 million _ an amount not included in AP's pay total.

But it's worth noting that three hedge fund managers _ James Simons of Renaissance Technologies Corp., Kenneth Griffin of Citadel Investment Group and Sears Holding Corp. Chairman Edward Lampert, who also runs ESL Investments _ together earned more than the 386 CEOs the AP studied combined. They collectively earned $4.4 billion last year, according to Alpha magazine, published by Institutional Investor.

Hedge fund managers say there is nothing wrong with such outsized returns because their pay is strictly related to performance and could fall to zero in any year when they stumble.

The likelihood of a similar flatlining of pay totals for CEOs of public companies is almost nil, however, even for companies with huge losses and dire prospects. And consultants expect CEOs to cite the fat paychecks of hedge fund managers and the kings of Wall Street to argue for even more lucrative packages.

It wasn't supposed to turn out this way.

This was expected to be the year that investor anger over pay boiled over. After Home Depot Inc.'s Robert Nardelli and Pfizer Inc.'s Henry A. McKinnell left their battered companies with golden parachutes worth $210 million and nearly $200 million, respectively, shareholder activists entered proxy season this spring primed for a showdown on pay and outsized retirement packages. It didn't happen.