Growing Sense Of Outrage Over Executive Pay

But whether that's punishment enough for the industry's critics is a matter of debate.

"Wall Street, when I began my career, had no public companies. They were private partnerships where executives had their personal wealth at stake, and they developed their risk-reward system when it was their own money at risk," said Jeffrey Sonnenfeld, an associate dean at the Yale School of Management. "They've kept that system, but it's other people's money at risk now. That's kind of outrageous."

Congress tried to tackle the pay issue last month in the bill that authorized a financial industry rescue. But corporate governance experts say the bill's pay provisions, which focus primarily on golden parachutes that executives often pocket upon a change in corporate control, are too weak and too narrow in scope to significantly change pay practices.

Rallying Around Reform

The lack of reform has fanned the frustrations of grass-roots groups including the Northeast Ohio American Friends Service Committee, which had never used executive compensation as a rallying cry until recently.

Greg Coleridge, a director of the committee, said the pay issue is a new manifestation of economic injustices that have long concerned the Quaker social action group, and one that has struck a nerve with members.

"We have public dollars coming from taxpayers, people who are having an increasingly difficult time in our corner of the world in Ohio, being transferred" to Wall Street, said Coleridge, who works in Cuyahoga Falls, north of Akron. "The leverage these dollars provide gives someone inside government an opportunity, and maybe in fact the responsibility, to provide some kind of limit on executive pay."

The Treasury Department, which got broad authority from Congress to dictate the terms of assistance granted to financial firms under the emergency rescue plan, forced American International Group to freeze the size of its bonus pool for 70 senior executives as a condition of a $40 billion capital infusion. But AIG is planning to pay $503 million in deferred compensation to some senior employees, warning they might otherwise leave the firm.

The Treasury Department, not wanting to discourage healthier firms from accepting bailout money intended to jump-start lending, has taken few steps to curb pay at the banks being bailed out. The department, however, has barred financial firms that receive capital infusions from deducting from their taxes any executive compensation exceeding $500,000 for each senior executive.

Uncertainty about what role, if any, the government should play in setting corporate pay standards has made it tougher for some activists to find an approach to the runaway pay problem.

"People involved in the movement for economic justice don't necessarily know how to mobilize around this issue," said Andrea Batista Schlesinger, executive director of the Drum Major Institute for Public Policy, a progressive think tank in New York. "Discontent and frustration is only furthered when you have a conversation in the abstract."

The institute held its first ever forum on executive pay this week.

Featured was Jim Keyes, chief executive at Blockbuster, whose novel employment contract required him to buy $3 million of company stock in his first 30 days on the job. He also must take his annual performance bonuses in the form of stock.

When Keyes was hired, Blockbuster was still recovering from a bitter proxy battle with billionaire investor Carl Icahn. Pay was one of the issues Icahn raised in his campaign to install new directors at the movie-rental chain, which in 2004 gave then-chief executive John Antioco a $54 million package that Icahn called "unconscionable."

Cognizant of the history, Keyes went to the board upon his hire last year with the unusual terms he proposed for his contract. It was a twist on a lesson he had learned in his previous job running 7-Eleven, where he said he developed "a sensitivity to the differential" in pay for executives and the hourly workforce they relied on to ring up sales at the convenience stores.

"I recognized coming into Blockbuster that there were questions about employee compensation," Keyes said. "Somewhat selfishly, I knew that I had to sell the investment community a new business strategy for this company, and that the case for change was more easily made if I was seen to be a co-investor with shareholders."