Sept. 5 (Bloomberg) -- Time Warner Inc. Chief Executive Officer Richard Parsons delivered outstanding performance for his shareholders in 2006 without a stupendous pay package.

He's not alone. I found 34 other CEOs at U.S. companies with market caps of at least $3 billion who show that huge compensation isn't a prerequisite for outstanding performance.

The CEOs were culled from my study of compensation versus performance for 542 chief executives (for the pay and performance of the 35, click here).

I found that 29 percent of the variation in CEO total pay was due to three factors: The company's size, as measured by 2006 sales; its total return for 2006; and the degree of pay risk incorporated into the CEO's pay package, as measured by the ratio of the present value of stock options to total pay (options being the most risky form of pay).

Using this data, I found a CEO whose total pay put him 548 percent above a competitive level. At the other extreme, there was a CEO whose $1-a-year pay put him 100 percent below the market. All 35 CEOs shared two characteristics:

* Their actual total pay deviated only between negative 10 percent and positive 10 percent compared with their competitive pay levels.

* They outperformed the 16 percent return on the Standard & Poor's 500 Index for 2006.

Riding Herd

Parson's total pay in 2006 was $18.3 million. That's also what my multiple regression pay model showed was a competitive level of pay. Time Warner's total return last year was 26 percent, significantly more than the S&P 500's return.

The Time Warner board compensation committee is doing what it should do: riding herd on the pay of top executives. Gone are the days when Steve Ross, who was chairman of Warner Communications and then head of the merged Warner and Time Inc., could automatically collect gargantuan compensation. And Gerald Levin, who succeeded Ross, was no slouch himself when it came to excessive pay.

Here are other examples of CEOs who received average pay yet delivered excellent performance:

* Robert Catell of Brooklyn, New York-based KeySpan Corp., a natural gas and electric utility, which was acquired last month by National Grid Plc. He had the lowest total return among the 35 CEOs at 21 percent, but even that beat the S&P 500 return by 5 percentage points. His total pay of $7.9 million put him 2 percent below his competitive level of pay.

* Mark Rohr of Albemarle Corp. in Richmond, Virginia, a maker of fine chemicals. He had the highest total return among the 35 CEOs -- a hefty 90 percent. His total pay of $6.2 million was 7 percent below his competitive level of pay.

Lanni, Curlander

* Terrence Lanni's MGM Mirage shareholders received a 56 percent return, one that they wouldn't often encounter at his Las Vegas casinos' gambling tables. For that performance, Lanni was paid $9.7 million, only 9 percent more than a competitive level of total pay.

* Paul Curlander of Lexington, Kentucky-based Lexmark International Inc., which makes printing products, had a return of 63 percent. His $11.4 million total pay was 2 percent below his competitive average pay.

The average total pay for the 35 CEOs was $10.8 million, or 0.9 percent below competitive total pay. Average total return was 35 percent, or more than double that of the S&P 500 Index.

Message to board compensation committees: If you hear the siren song that you have to pay hugely to get huge performance, don't buy into it. There are some fine-performing CEOs who prove it's not always true.

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Total pay starts with the total compensation figure in the proxy's Summary Compensation Table. From this figure are deducted the amounts included in total pay for stock awards and option awards. This is because those figures may include accruals from earlier years. Then the grant-date fair values for stock option grants, free share awards and contingent performance share awards made in 2006 are added in. Raw data for this study were obtained from Equilar Inc.

To contact the writer of this column: Graef Crystal in Las Vegas at graefc@bloomberg.net

Last Updated: September 5, 2007 00:25 EDT