The passion for reforming corporate America seems to have had both the fervor and the brevity of a high school crush.

Congress busily went about passing notes -- or, if you prefer, legislation -- rife with banalities intended to improve executive behavior. But little has been done to punish the bullies themselves and fix the issue that forms the root of the problem: the abuses in so many executive stock option plans.

Now, the problems with executive compensation aren't limited to abuse of stock option grants. But that's a fine place to start in terms of reform, according to compensation expert Graef Crystal. Crystal developed an idealized plan for option pay at the behest of the California State Teachers' Retirement System, or Calsters, the nation's third-largest pension fund. Crystal's findings and proposal drive home how excessive options packages have become.

Companies are aware that there's little action small investors can take -- even if they're able to acquire and understand the executive compensation plan. But many "socially responsible" fund companies, such as Domini Investments and Calvert Group, consider compensation plans when investing. And managers of large pension funds such as Calsters, Calpers and the AFL-CIO serve as the best watchdogs on this issue.

Below are a sampling of some of the thorniest issues in executive stock option plans today.

The bigger the better. The actual size of option grants has exploded in recent years. Crystal looked at 180 companies with 2001 revenue of $8 billion or more. In the three-year period from 1999 through 2001, the average CEO received an average option grant of $9 million a year (present value as of February 2003).

That's 562 times the present value of the typical options grant in the mid-1960s.

In addition, option "mega grants" -- millions of shares granted in one fell swoop -- have begun to crop up at unlikely intervals, as opposed to annually, as is historically the case. The mega grants coupled with erratic timing seriously reduce the compensation amount that gets reported during pay surveys -- and that means investors aren't as able to judge what its executives are making.

Timing is everything. If option grants are not restricted to, say, distribution at the January board meeting, Crystal says, that allows companies to time the option grant in order to maximize the future gains of the chief executive. That means, Crystal says, a mega-grant could be made just a few days before the company announces positive quarterly earnings, or a few days after it announces earnings won't meet Wall Street expectations. Either way, the CEO receives options with a low, advantageous strike price (the price the executive must pay to exercise the option).

Reprice this! The whole idea of using options as pay is the supposed incentive inherent in options -- if the CEO does well, the company does well, its stock price rises, and the CEO does well (financially). And surely there's some sense to that. But when the technology companies that championed options began systematically repricing options that no longer benefited the executives because the stock price had fallen so low, all pretense of "incentive" fell away. Crystal points to particularly egregious offenders such as Apple Computer ( AAPL), which has had at least eight option repricings in recent years, and Cypress Semiconductor ( CY) and Advanced Micro Devices ( AMD), with seven and six repricings, respectively. Crystal likens the practice of repricing options to a CEO trading in a 1971 Cadillac for a 2003 model, with no additional cost.

Dividend distortion. Crystal notes the conflict of interest inherent in option grants. Since options entitle the holder to price appreciation, but not dividend distributions, executives are less inclined to increase their company's dividend payout. Rather, stock options encourage CEOs to retain earnings to boost share price, which could dampen total shareholder return.

Regulation relaxation. There was a time, not so long ago, when options were as risky to the CEO as they were to the average investor. But no more, Crystal says. The Securities and Exchange Commission used to have stricter insider trading rules, not the least of which required executives to hold the shares for at least six months after exercising stock options. And yes, if the stock price had fallen by then, the CEO's gains could be wiped out. Now, though, shares can be sold as soon as they're exercised.