While chief executives generally saw larger base salaries and bonuses in 2003, companies have developed stronger ties between CEO pay and performance, according to a study by Mercer Human Resource Consulting and the Wall Street Journal.

The study examined the 2004 proxy statements of 350 of the largest public companies in the United States. The study found that CEO pay generally reflected the companies' better performance in 2003. Median total annual compensation (base salary and bonus) was $2.1 million in 2003, up 7.2 percent from 2002, while corporate profits increased a median of 19.2 percent, according to the study. By contrast, median total annual compensation jumped 10 percent from 2001 to 2002, while corporate profits increased a median of 14.8 percent.

The study found more companies moving away from stock options, and more companies granting stocks outright via restricted-stock programs. Last year, 278 companies awarded stock options to CEOs, down from 295 in 2002. In addition, the study found that stock options are accounting for a smaller portion of the long-term incentives offered to CEOs.

The Financial Accounting Standards Board's proposed new rules regarding the expensing of stock options have played a role in fewer companies using stock-option grants, according to Peter T. Chingos of Mercer. He sees more changes ahead.

"We are, in effect, moving from one era of executive compensation to the next," says Chingos. "It will take some time for companies to retool and realign their programs. Clearly, it was not 'business as usual' for executive compensation in 2003, and we expect to see more changes ahead."

The study was published in a special section of the Wall Street Journal.