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."

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