CEO Pay Unrestrained by 'Good Governance' Push

Some firms are making particularly bold strides in matching pay with performance.

Last year, Microsoft moved to expense stock options, a virtual lone act by a technology company at the time. Instead of posting big options charges, the company has moved away from awarding options to giving out restricted stock to its executives and employees.

General Electric (GE) revamped executive pay packages last year, decreasing the amount of stock options it hands out, in favor of restricted stock and other forms of stock-based compensation. For CEO Jeff Immelt, GE replaced stock options and restricted stock with performance share units, a type of stock-based compensation that Immelt will receive only if the company meets specific stock price and operating targets.

IBM (IBM) has begun to award top executives options that have a strike price 10% higher than the market price. In other words, IBM's stock would have to rise 10% before the executives' options are in the money.

Other forms of compensation that Microsoft, GE and IBM are using to replace traditional stock options include restricted stock, premium-priced options and performance share units, which reward shares of stock to executives who meet specific performance targets.

Despite the pressure and scrutiny, companies still may be able to avoid radically changing how they pay executives. Opponents of options expensing are fighting a bitter battle against the FASB proposal.

Likewise, the outcome of the proxy access skirmish is still in doubt. In the interim, instead of scaling back CEO pay, most companies seem to have simply shifted from options to other forms of compensation.

"The campaign to rein in executive pay has missed the boat," said TCL's Hodgson. "[Investors] had a chance when the markets were bad and people were not making any money. But CEO pay didn't seem to go down very much, if at all."

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