July 26 (Bloomberg) -- The debate rages.

On one side there is the Business Roundtable, an invitation- only group of 160 major company chief executive officers, which on July 5 published a study that says growth in CEO pay over a 10-year period was in line with companies' 10-year shareholder returns.

On the other side are the corporate governance fans, who cite one or more reasons why the Business Roundtable study is flawed. Leaving aside their rationale, they are incensed that a business organization would be so stupid as to try to con the American people when everyone knows that the pay of chief executive officers has risen to obscene levels.

So who's right here?

As it turns out, both sides are right, but for different reasons.

To shed some light on this dispute, I searched the Standard & Poor's Execucomp database for CEOs who were in their jobs during the 10-years between 1995 and 2005. I came up with 83 of them.

My definition of total pay is a bit different from that of the Business Roundtable, but not so different as to render my results and theirs incomparable. My definition includes the sum of: base salary; annual bonus; the value of restricted stock awards at the time of award; the estimated present value of stock option grants measured at the grant date using the Black-Scholes model; payouts under other forms of long-term incentive compensation; and miscellaneous compensation.

A Fit

For the 83 CEOs, the median and average cumulative increase in total pay between 1995 and 2005 was, respectively, 228 percent and 412 percent.

For the same 83 companies, median and average cumulative total shareholder return over the same period was, respectively, 276 percent and 377 percent.

Not a bad fit. Score one for the Business Roundtable study.

But equating the pay growth and shareholder return statistics presumes that there is some sort of linkage between them -- that the CEOs with the biggest growth in pay delivered the largest growth in total return for shareholders.

That's where the Business Roundtable study falls apart.

A regression analysis I conducted of the relationship between pay growth and total return shows that 10-year total return can account for only 27 percent of the variation in pay growth, leaving fully 73 percent of the variation not explainable by that performance measure.

Dismal Result

Given that dismal result, I ran another regression analysis, this one involving the relationship between the increase in pay over the 10 years expressed in dollars rather than in percentage terms and 10-year total return. The results were even worse. You can only account for 12 percent of the dollar increase in pay if you know the 10-year total shareholder returns of the companies in my study.

Where, you might ask, is that remaining 88 percent? Well, a good part of it lies in the size of the various companies. Company size has been the single most powerful variable explaining pay differences. But size isn't performance -- or at least it's not to most shareholders.

Even so, a lot of that 88 percent is just lost to random noise and the chaotic pay philosophies and practices of individual companies.

Here is a listing of the 83 companies, arranged in descending order of 10-year pay growth:

                                                        Cumulative
                                           Increase in       Total
                                             Total Pay      Return
Company                   CEO                1995-2005   1995-2005
Ryland Group Inc.         Chad Dreier            2934%       2190%
KB Home                   Bruce Karatz           2370%       1116%
Northern Trust Corp.      William Osborn         2095%        326%
MDC Holdings Inc.         Larry Mizel            2093%       1735%
Maxim Integrated Prod.    John Gifford           1853%        510%
Linear Technology Corp    Robert Swanson *       1313%        367%
TCF Financial Corp.       William Cooper *       1278%        321%
Murphy Oil Corp.          Claiborne Deming       1152%        629%
Toll Brothers Inc.        Robert Toll            1070%        726%
Noble Corp.               James Day               951%        685%
Hormel Foods Corp.        Joel Johnson *          945%        234%
Whole Foods Market Inc    John Mackey             881%       1978%
Edison Intl.              John Bryson             792%        232%
Occidental Petroleum      Ray Irani               786%        434%
Dominion Resources        Thomas Capps *          693%        213%
Pub. Svc. Ent. Grp.       James Ferland           674%        276%
Cardinal Health Inc.      Robert Walter *         650%        319%
PPL Corp.                 William Hecht           601%        269%
AFLAC Inc.                Daniel Amos             573%        597%
Helmerich & Payne         Hans Helmerich          466%        554%
BB&T Corp.                John Allison            460%        328%
Arkansas Best Corp.       Robert Young *          448%        479%
Insteel Industries        Howard Woltz III        386%        154%
Skywest Inc.              Jerry Atkin             384%        788%
United Technologies       George David            358%        449%
Costco Wholesale          James Sinegal           352%        451%
Wells Fargo & Co.         Richard Kovacevich      351%        387%
Commercial Metals         Stanley Rabin           350%        379%
Zions Bancorporation      Harris Simmons          325%        343%
Black & Decker Corp.      Nolan Archibald         324%        178%
Oceaneering Intl.         John Huff               306%        287%
Pall Corp.                Eric Krasnoff           298%         70%
Pogo Producing Co.        Paul Van Wagenen        296%         85%
Coca-Cola Bottling        Frank Harrison          291%         51%
ENSCO International       Carl Thorne             279%        300%
Bear Stearns Cos.         James Cayne             260%        608%
Jacobs Engin. Grp.        Noel Watson *           254%        442%
NBTY Inc.                 Scott Rudolph           248%       1140%
W. W. Grainger Inc        Richard Keyser          246%        148%
Enzo Biochem Inc.         Elazar Rabbani          242%         33%
Target Corp.              Robert Ulrich           242%        865%
Alberto-Culver Co.        Howard Bernick          228%        380%
Sanmina-SCI Corp.         Jure Sola               218%         44%
Universal For. Prod.      William Currie          216%        523%
Norfolk Southern          David Goode *           197%        112%
Whitney Holding           William Marks           174%        176%
Parker Drilling Co.       Robert Parker Jr.       172%         77%
AT&T Inc.                 Edward Whitacre         163%         21%
Ethan Allen Int.          Farooq Kathwari         155%        547%
Valmont Industries        Mogens Bay              152%        211%
UST Inc.                  Vincent Gierer *        151%        118%
Brush Engin. Matls.       Gordon Harnett          144%          6%
Raymond James Finl.       Thomas James            143%        462%
FirstMerit Corp.          John Cochran            134%        148%
Robert Half Intl.         Harold Messmer          131%        452%
Ryan's Restaurant Grp.    Charles Way             126%        158%
Astec Industries          Don Brock               123%        561%
Orbital Sciences          David Thompson          113%          1%
NACCO Industries Inc      Alfred Rankin            99%        147%
J. B. Hunt Transport      Kirk Thompson            81%        476%
Dow Jones & Co Inc.       Peter Kann *             79%         11%
Micron Technology         Steven Appleton          76%        -69%
Harsco Corp.              Derek Hathaway           73%        205%
J&J Snack Foods           Gerald Shreiber          72%        397%
Fifth Third Bancorp       George Schaefer          64%        213%
Thor Industries Inc.      Wade Thompson            59%       1086%
Mueller Industries        William O'Hagan          45%        139%
Griffon Corp.             Harvey Blau              35%        214%
Charles Schwab Corp.      Charles Schwab           34%        415%
BJ Services Co.           James Stewart            28%       1049%
Datascope Corp.           Lawrence Saper           22%        112%
Dixie Group Inc.          Daniel Frierson          22%        261%
National Presto Ind.      Maryjo Cohen             21%         78%
Tecumseh Products         Todd Herrick             16%        -42%
Magnetek Inc.             Andrew Galef *            0%        -81%
Photronics Inc.           Const. Macricostas *     -1%         22%
Washington Post Co.       Donald Graham           -18%        200%
Sun Microsystems          Scott McNealy *         -26%        146%
Aquila Inc.               Richard Green           -28%        -73%
Walt Disney Co.           Michael Eisner *        -30%         36%
Progress Software         Joseph Alsop            -32%        192%
Carnival Corp.            Micky Arison            -33%        378%
Molex Inc.                Frederick Krehbiel *    -35%         69%

* Former CEO              Low                     -35%        -81%
                          Median                  228%        276%
                          Average                 412%        377%
                          High                   2934%       2190%

The shareholders of Ryland Group Inc. didn't receive as much in total return as the company's CEO, Chad Dreier, received in pay increases. But I doubt they are ready to storm the company's headquarters, given their 2,190 percent cumulative shareholder return.

But the paving stones may be flying -- or ought to be flying -- at companies such as KB Home and Northern Trust. There, CEOs Bruce Karatz and William Osborn saw their pay advance at a far faster rate compared with what their shareholders received in total return.

And then we have CEOs like John Mackey of Whole Foods Market Inc. His pay went up 881 percent over 10 years, but his shareholders received a 1,978 percent cumulative total return. Shop at Whole Foods, and both your physical and financial health will be improved -- or so it seems.

As I said earlier, both sides in this debate have good points to make.

Contrary to what many believe, the growth in total pay, on the average, doesn't seem to have been out of line with the fruits delivered to shareholders.

But lest fat-cat CEOs preen themselves in the sun, there's a lot of work to do before anyone can say, with a straight face, that it is performance that drives how much of an increase in pay you will receive.

(Graef Crystal is a columnist for Bloomberg News. The opinions expressed are his own.)

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

Last Updated: July 26, 2006 00:08 EDT