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E*Trade CEO Gives Back Pay

Runaway executive compensation has been an issue with shareholders for years at many American companies, and finally a CEO has bowed to the pressure and tied his pay solely to company performance - but not without a little prodding.

The boss at E*Trade Financial Inc. , Chairman and CEO Christos M. Cotsakos, is actually giving back a $21 million chunk of last year's compensation.

Of course, the company's news release on the matter followed the publication of a Wall Street Journal story on Cotsakos saying that he is "the highest-paid chief executive in the brokerage business, with a pay package valued at about $80 million."

The story quoted one pay consultant as saying the compensation package "appeared to be a runaway gravy train."

E*Trade apparently got the message.

The Menlo Park, Calif.-based company said that Cotsakos now has signed a two-year contract that includes zero base salary and an annual bonus based exclusively on company performance.

And he is returning $6 million previously contributed on his behalf to the company's Supplemental Executive Retirement Plan. He also agreed to return two million shares of company stock from a prior grant. And lastly Cotsakos agreed to what the company called a "significant reduction of severance pay in the event of a termination either following a change in control or outside a change in control."

Shareholders had complained that Cotsakos' pay package was outlandish, even by today's standards. The CEO of Goldman, Sachs, by comparison, made about $19 million in 2001, Reuters said, a year when the company earned $2.31 billion. E*Trade last year lost $241.5 million.

The Journal story said that the online trading and discount brokerage firm also pays for security systems for Cotsakos' house and plane as well as his tuition and flights to London to finish a Ph.D. from a university there. The company is facing at least one shareholder lawsuit over the boss's compensation.

"I have listened to shareowner concerns and want to dispel any doubt that my commitment to the success of this company is unwavering," said Cotsakos in a statement. "I am eager to eliminate the distraction of the compensation discussion so that we can focus on the business of E*Trade Financial."

Whether they are shareholder concerns (the stock is trading at about $6 a share) or concerns about bad publicity, the news will surely please the AFL-CIO, which says that two big trends distinguished CEO pay in 2001: "first, a dangerous and ongoing disconnect between performance and pay, and second, stark double standards on retirement security and job security for CEOs compared with workers."

The flagging economy and poor corporate performance -- including falling stock prices, declining profits and big layoffs -- have barely made a dent in executive pay, the AFL-CIO said.

Meanwhile, if you want to check on how much the boss is making at your company, check out the nifty search function for public companies at ecomponline.com/.