The defenders of high CEO pay like to argue that because executive rewards are so closely tied to the stock market, the surge in stock prices in recent years is what has caused pay to soar. If stock prices drop, they insist, then so will CEO pay. That being the case, there really is no executive-compensation problem in the U.S. Rather, the system is working just fine; it is, as it should be, paying for performance. Nice try. I recently analyzed the pay changes for 383 CEOs of large companies (that is, companies with market capitalization of $1 billion or more) for the four fiscal years between 1993 and 1997. (Pay is defined as the total of base salary, annual bonus, awards of free shares, long-term incentive-plan payouts, stock-option gains, year-to-year change in paper profits on unexercised stock options, and miscellaneous compensation.) What I found isn’t likely to warm the hearts of the high-pay apologists out there.

Although the average annual growth in total shareholder returns (stock price appreciation plus reinvested dividends) over the four-year period was a healthy 20.6 percent per year, the growth in CEO pay averaged an astounding 47.3 percent per year. When a variation on that statistic was published in the New York Times last fall, it brought forth a howl of protest from Holman W. Jenkins, Jr., a columnist for the Wall Street Journal, who argued in effect that Moses didn’t come down from Mount Sinai with a commandment that the rate of increase in CEO pay should precisely match the rate of increase in total shareholder returns. As he saw it, the increase that I calculated was merely an example of efficient markets in operation.

What Jenkins doesn’t know is that hardly any statistical relationship exists between the change in total returns over time and the change in CEO pay over time. It would be one thing if the pay of practically every one of the 383 CEOs in my study was changing at a rate of 2.3 times the rate of change in shareholder return. But the statistical tests I ran revealed that knowing the rate of increase in total shareholder return allows you to explain only 18 percent of the variation in increases in CEO pay. Or, to put it another way, fully 82 percent of the changes in pay among the 383 CEOs had absolutely nothing to do with their company’s shareholder returns.

What about Texas CEOs? There were 24 in my study. Of those, 7 ran companies whose total shareholder return was significantly lower than—that is, at least five percentage points below—the national average of 20.6 percent per year. And which was the worst, relatively speaking? When I measured for each of the 7, the gap between subpar performance and growth in CEO pay, the CEO with the biggest gap turned out to be James L. Pate, then the CEO of Houston-based Pennzoil, now the CEO of newly configured Pennzoil—Quaker State. From the end of 1993 to the end of 1997, Pennzoil’s total shareholder return averaged only 11.4 percent per year—just a bit more than half the rate of companies generally. (The company also underperformed within its own industry, but by a slightly smaller margin.) Yet Pate’s total pay rose at the stunning rate of 60 percent per year. Taken by itself, that awesome gap between performance and pay would without a doubt land the Pennzoil board in the pay Hall of Shame. On the other hand, though Pate’s pay has risen with head-snapping velocity, he was, for the single year of 1997, actually underpaid by 27 percent. The most charitable explanation is that Pennzoil’s directors have been playing catch-up, though it would have been nicer if they had waited until Pate had delivered some good news to his shareholders.

Whatever the case, Pate is, overall, the most egregious example of an active Texas CEO whose pay is out of whack with his large company’s performance. As a result, he is the recipient of the first Crystal Boot award, which I’ll be giving out quarterly to the Texas executive who seems unworthy of his or her compensation package. CEOs whose snouts are not totally immersed in the trough and therefore can focus their eyes on the concerns of their shareholders have nothing to fear.