You get what you pay for: well, not always, our study of CEO compensation shows. But performance isn't the only reason pay keeps rising.

• Author: Maley, Frank

Visions of handcuffed executives from Enron, Tyco International and Adelphia Communications haunted boardrooms. Martha Stewart's day in court had yet to come, but her suspiciously timed stock sale had wags wondering if the home-fashion diva's next residence would be tire most stylish in its cellblock. What better time to gather hundreds of CEOs and business leaders in Charlotte to hear investor Warren Buffett lecture about restoring trust in American business? What better motivation to search their souls about how they're paid and their corporations governed?

What those attending The Forum for Corporate Conscience, which ran three days in March, didn't seem to realize is they face an issue of trust that runs deeper than the shenanigans of a few rogue executives gobbled up by greed. According to a study for BUSINESS NORTH CAROLINA by the Charlotte office of Findley Davies Inc., a Toledo, Ohio-based human-relations consultant, the median change in pay among CEOs of the state's 75 largest public companies was 16.3% in 2002, when the median total return to their shareholders was -3.7%. In 2001, pay had paralleled performance: median change in compensation, 10.9%, and total return, 11.7%.

These are one-year snapshots, of course, but the latest is not a picture investors want to duplicate. "The trend can't be higher pay and bad performance--not over the long term," says Robert Bushman, an accounting professor at UNC Chapel Hill.

The forum sparked plenty of lively discussion, most of it closed to the public, and when it was over, attendees adopted a list of high-minded but vague "collective intentions," three of which were aimed at CEO pay. They challenged companies to establish what they called meaningful holding periods for stock and options given top executives as compensation, to require top execs to own "a substantial amount" of company stock and to base compensation on specific short-term and long-term performance benchmarks.

Forum organizers plan to survey CEOs in September to find out what, if anything, they're doing differently as a result. "To draw a parallel to a football game, we've probably moved the ball a couple of inches," concedes co-founder Chris William, moderator of public television's Carolina Business Review and senior executive consultant in Charlotte-based Wachovia Securities' private wealth management group.

As football fans know, a few inches can be significant, but a team typically needs much more to score. It will be up to those who set CEO pay--corporate directors, especially those who serve on compensation committees--to carry the bail from here.

Peter Browning is one of those ball carriers. Dean of the McColl School of Business at Queens University of Charlotte, he's the outside chairman of Charlotte-based steel maker Nucor and a director of six other public companies. He's on Nucor's compensation committee and just finished a stint as chairman of the compensation committee at Wachovia. Before moving into academia, he was CEO of Hartsville, S.C.-based packaging maker Sonoco Products. He, too, had a hand in the forum, serving on its advisory board. "The problem is, there is no perfect compensation system. There never has been, and there never will be. It's very, very...