Business has slowed, layoffs mount, but executive pay continues to roar-at least so far. Business Week's annual survey finds that chief executive officers (CEOs) at 365 0f the largest US companies got compensation last year averaging $3.1 million-up l.3 percent from 1994.

　　Why are the top bosses getting an estimated 485 times the pay of a typical factory worker? That is up from 475 times in 1999 and a mere 42 times in 1980. One reason may be what experts call the "Lake Wobegon effect". Corporate boards tend to reckon that "all CEOs are above average"-a play on Garrison Keillor's famous line in his public radio show, A Prairie Home Companion, that all the town's children arc "above average". Consultants provide boards with surveys of corporate CEO compensation. Since directors are reluctant to regard their CEOs as below average, the compensation committees of boards tend to set pay at an above-average level. The result; Pay levels get ratcheted up.

　　Defenders of lavish CEO pay argue there is such a strong demand for experienced CEOs that the free market forces their pay up. They further maintain most boards structure pay packages to reflect an executive's performance. They get paid more if their companies and their stock do well. So companies with high-paid CEOs generate great wealth for their shareholders.

　　But the supposed cream-of-the-crop executives did surprisingly poorly for their shareholders in 1999, says Scott Klinger, author of this report by a Bostonbased Organization United for a Fair Economy. If an investor had put $10,000 apiece at the end of 1999 into the stock of those companies with the 10 highest-paid CEOs, by year-end 2000 the investment would have shrunk to $8.132. If $10,000 had been put into the Standard & Poor's 500 stocks, it would have been worth $9,090. To Mr. Klinger, these findings suggest that the theory that one person, the CEO, is responsible for creating most of a corporation's value is dead wrong. "It takes many employees to make a corporation profitable."

　　With profits down, corporate boards may make more effort to tame executive compensation. And executives are making greater efforts to avoid pay cut. Since CEOs, seeing their options "under water" or worthless because of falling stock prices, are seeking more pay in cash or in restricted stock.