Back in the early 1990s, in an effort to gain more control over executive compensation, powerful institutional investors pressured the Securities and Exchange Commission to impose a new set of disclosure rules on U.S.-based public companies.

No longer would executive salaries be decided in obscurity, far from the scrutiny of shareholders. Instead, a company would be required to present shareholders with an outline of its compensation philosophy as well as detail the pay, and how it was determined, for its five most-highly reimbursed executives.

So why are executives making more money than ever before?

Because in addition to demanding greater disclosure, institutional investors have been behind an even more significant trend the push to "incentivize" management, which usually means tying compensation to a company's stock performance.

Today, nearly half of all publicly traded companies have tied portions of executive pay to stock-price performance, according to the Bethesda-Md.-based Institutional Shareholder Services Inc., an organization of about 500 institutional investors.

"The majority of our clients have aligned management with the shareholders, and this has led to widespread use of option grants," said David Leach, managing director of Compensation Resource Group Inc., a Pasadena-based consulting firm specializing in executive pay.

With Wall Street in a bull market of epic proportions, many executives have found themselves sitting atop mountains of riches that might have been downright embarrassing a generation ago.

"You have had enormous growth in mutual funds, and they are buying everything, and everything is trading for 25 times earnings, or 30 times earnings," said Robert Apfelberg, of Woodland Hills-based Commerce Partners Inc., a corporate turnaround consultant.

"We would like to see more use of indexed options an executive would only get option grants if the company outperformed the market, or an index of companies in a peer group," said Jill Lyons, spokeswoman for Institutional Shareholder Services.

That way, if a company's stock rose just because of a stock market bubble, an executive wouldn't necessarily benefit.

But only a handful of the 8,500 publicly held companies have embraced indexed options. And despite groups like Institutional Shareholder Services, plenty of money managers could care less what a CEO is making as long as the company's stock continues to rise.

"The only thing we care about is if the company performs," said Robert Bender, a La Ca & #324;ada-based money manager who specializes in growth companies. "If they don't, we sell it."

Even the California Public Employee Retirement System, or CalPERS, which led the charge in calling for greater disclosure of executive pay in the early 1990s, has not embraced the use of indexed options.

"If the salaries are not out of line with performance, then we are satisfied," said Brad Pacheco, spokesman for the $140 billion-in-assets pension fund.

Money managers, pension funds, mutual funds and insurance companies have been wielding a growing amount of clout over corporate governance issues over the past two decades. Such investors now often control more than 50 percent of any blue-chip company's stock.

It's a big change from the past, when shareholders tended to be a disparate group of many individuals, perhaps a few wealthy titans, and some institutions. They usually had little hope of expressing their views on a "private" topic like executive pay.

Indeed, until the SEC-mandated disclosure reforms in 1992, it often was difficult to determine exactly what or how executives were being paid at all.

"Before the changes in SEC proxy and disclosure rules, executive pay was often unclear," said Don Segolla, regional partner for KMPG Peat Marwick LLP, the CPA giant. "It's hard to be influential when you don't know what is going on."

That changed in 1992, when the SEC, at the insistence of large institutions, required public companies to reveal the compensation of their top executives to shareholders.

The reforms also called for the compensation committee to be made up of "outside" directors that is, individuals who are neither employees of the company nor professionals who have contracts with the company.

"There is certainly less cronyism, and more scrutiny than 20 years ago," said Leach, of Compensation Resource.

Most executive-pay consultants concur that the reliance on options has changed executive behavior.

Once, executives of public companies spoke about the "multiple publics" they served as in employees, community and shareholders. More often, executives today speak solely about fiduciary responsibilities to shareholders.

"When you are a manager, you try to make the best decisions, but I will tell you one thing: If I have a lot of stock options, I will ultimately bend in the direction of the shareholders," said Apfelberg.

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