HOW CEO PAY GOT AWAY

(3 of 3)

One solution embraced by the likes of DuPont and BankAmerica is to grant CEO stock options that can be cashed only after the stock has risen a specified amount. That way a CEO doesn't make a killing unless the stock really zooms. An even better answer is to devise stock options that are indexed to the market or some peer group. They would remain worthless unless the stock outperforms its competitors. Some have suggested the CEOs be required to buy stock above the market price, but that incentive could hurt workers, since a time-honored method of making the stock price jump is to slash jobs. But something has to give, and the CEOs know it. Shareholders will continue to reward extraordinary performance, but being at the helm in a favorable tide doesn't qualify.

--Reported by Bernard Baumohl/New York