By JASON BOOTH

Staff Reporter

L.A.'s top corporate executives have been hit with a 29 percent pay cut, as the effects of lower earnings and increased merger activity take their toll.

In the Business Journal's annual survey, the 100 highest paid local public company executives were paid, on average, $4.2 million in 1998, down from $5.9 million the year before and $5.5 million in 1996.

The figures run contrary to the national trend, which shows public company executives continuing to enjoy pay increases though at a slower pace than in previous years.

"With consolidation in certain industries and the coming down to Earth of some executive pay packages, you have really seen a drop in L.A.," said Joshua Lurie, chief executive of Joint Information System, a New York compensation research company that compiled the list for the Business Journal.

On an individual basis, there were several notable results, including the inclusion of three executives at fast-growing EarthLink Network Inc. in the top 10 as well as the sharp drop of Walt Disney Co. Chairman Michael Eisner, who was beaten out by Chief Financial Officer Thomas Staggs as the highest-compensated Disney executive.

Topping the Business Journal list is Stephen Bollenbach, chairman of Hilton Hotels Corp., with total 1998 compensation of more than $27 million (though most of that is made up of stock options that have been granted but not exercised).

Coming in second was Charles Betty, chief executive of EarthLink, at $23.4 million, followed by Linda Wachner, chairwoman and chief executive of Authentic Fitness Corp., at $19.7 million.

To determine the highest paid executives, several factors were considered, including the sum of base salaries, bonuses, long-term incentive pay plans and granted stock options. While the options were granted, they were not necessarily exercised.

In L.A., executive compensation is an especially tricky issue because it carries with it the cross-current of recruiting and retaining top people versus the elitist image that a seven- or eight-figure income often connotes. In addition, shareholder groups and institutional investors have become increasingly concerned about the role that stock options play in the executive compensation package particularly for companies that are losing money or performing poorly on Wall Street.

There are a number of possible explanations for the dropoff in average compensation the most obvious being that overall profitability at many L.A. public companies is down and that executive compensation increasingly is tied to corporate performance.

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