CEOs are taking a hit from the recession - less total compensation, smaller bonuses, nearly worthless stock options - but their companies are already making adjustments that could mean fatter paychecks in the future.

An Associated Press analysis shows the median pay package for CEOs of companies in the Standard & Poor's 500 index fell 7 percent to $7.6 million in 2008.

And the potential hit to their pocketbooks could be even larger if stock prices don't rebound. One clue: 90 percent of the $1.2 billion in CEO stock options granted last year are "under water," meaning the current stock price is too low to yield a profit, the AP analysis shows.

Boards already are trying to cushion the blow. The AP found that some have changed the rules to make it easier for executives to qualify for bonuses. Others are doling out more stock options, which give executives the right to buy shares in the future at prices locked in today.

Other findings in the AP's analysis:

_ Four of every five CEOs took home a cash bonus, despite the fact that the stock prices of the companies in the survey fell by an average 36 percent and profits fell 31 percent.

_ The median payout in cash for salary and bonuses fell 20 percent from a year earlier to $2.4 million. But that's still 48 times what the average U.S. worker makes, based on the most recent government figures.

_ Of the 10 CEOs who took the biggest pay cuts last year, four were heads of financial services companies. Overall, the heads of companies that develop and process raw materials - including supplies for construction, steel and glass, and paper products - took the biggest hit. That group's median compensation shriveled 26 percent to about $6.3 million.

Since the economic meltdown, pressure has grown from shareholders, Congress and President Barack Obama for boards of directors to rein in executive pay. But even with all that scrutiny, experts on CEO compensation say it's too soon to call the 2008 decline in pay the start of a trend.

"I wouldn't yet say this is a watershed moment for executive compensation. This is a watershed opportunity," said Jesse Brill of the Web site CompensationStandards.com and one of the nation's foremost experts on CEO pay. "I am fearful too many boards won't take a hard stance to enforce significant change."

There are already examples of corporate boards setting CEOs up for a potential windfall. Many made large stock grants in the first few months of 2009, when stock indexes dipped to levels not seen in more than a decade. The S&P 500 has rebounded more than 30 percent from its early March low, though it's off 44 percent from its October 2007 peak. Given the timing of the early 2009 stock awards, a sustained stock market recovery would supercharge the profits when these options are exercised.

SunTrust Banks illustrates how the rules of the game are changing. Its board voted in February to grant CEO James Wells options on 1.1 million shares, more than four times the number he received in 2008. That unusually big award became a target of shareholder groups, and in April the company said Wells had declined the full amount and would accept only half, 550,000 options. He will have to meet performance goals to earn slightly more than half of those options.

The exercise price on the 2009 grants is about $9 a share, reflecting the bank's stock price in February when it was close to an 18-year low. A year earlier his options had an exercise price close to $65, where the shares were then trading. SunTrust shares now are at $15, meaning that while Wells' 2008 options are deep under water, his 2009 options already are in the money to the tune of about $3 million.

The AP analysis is based on the compensation disclosures of 309 companies in the S&P 500 that filed proxy statements with federal regulators through April 20 and had the same CEO for the last two years. The overall AP database also includes 78 chief executives who headed their companies only in the second year. Company stock market and earnings performance figures were provided by Capital IQ, a unit of Standard & Poor's.

The AP formula shows how corporate boards value pay packages for their executives. It adds up salary, perks, bonuses, preferential interest on deferred pay, and the value a company puts on stock options and stock awards on the day they were granted last year.

When boards grant stock options to executives, they assign an exercise price that typically mirrors the share price on the day of the option grant. Most companies give CEOs several years to decide whether to exercise the options. If the stock does well, the payoffs can be enormous.

To put a value on a CEO's stock compensation, the company relies on formulas that make assumptions about how its stock will appreciate over the life of the options and what the resulting profit value will be for the CEO when the options are exercised.

If a company's stock has fallen sharply since options were granted early in 2008, the stock will have to rise sharply for a CEO to realize the original value the company put on the stock compensation.

The median compensation of $7.6 million means half of the CEOs in the AP sample made more than that and half less. That was down about $585,000 from 2007.

Chesapeake Energy CEO Aubrey McClendon topped the AP list with a total package of $112.5 million, even though his company's stock price fell nearly 60 percent last year. Motorola co-CEO Sanjay Jha was second with $104.4 million. It was the first time since AP started analyzing CEO pay three years ago that anyone topped $100 million.

McClendon's total was inflated by a $75 million bonus he received on Dec. 31 as part of a new employment contract. He owns a stake in some of the company's wells, and the company said his bonus payment will go toward his portion of the cost of developing and maintaining them.

The bonus came two months after McClendon was forced to sell more than 31 million shares of Chesapeake stock - valued at $550 million and down from a peak of $2.2 billion only three months earlier - to cover bank demands for repayment of loans. The huge sale helped further drive down the stock price last fall.

Chesapeake said in regulatory filings that McClendon's overall pay reflects his role "in shaping the vision for the company and growing it into the largest independent producer of U.S. natural gas."

There were similar examples of a mismatch between pay and stock performance throughout corporate America. At 104 companies in the AP sample, the chief executive's bonus got fatter even though the stock price declined.

Carol Bowie, head of the Governance Institute at RiskMetrics Group, a financial risk management firm, said that is part of a troubling trend. "Executives have been richly rewarded over the last decade because of market trends, not necessarily because of superior performance. Now, when the market trend goes the other way, they want to be bailed out," she said.

Motorola's Jha was an example of how many executives' total pay is heavily weighted in stock options and stock grants. Overall, such compensation accounted for 58 percent of total pay in the AP's larger sample of 387 companies.

Jha was a rising star at Qualcomm when Motorola wooed him last year with a package made up almost entirely of stock grants and options; the company valued them at $103.5 million on the day they were awarded in August, when the company's stock was around $10 a share.

Even though Motorola shares have since fallen to about $6, the 3.6 million stock grants he will receive over the next three years - effectively a signing bonus - still are worth more than $21 million.

But for Jha to wind up realizing the $104.4 million that Motorola valued his 2008 compensation at, he must engineer a turnaround of its struggling cell phone business and propel Motorola shares well above $10 a share. His 16.5 million options don't turn profitable until the stock reaches that level.

The 10 highest-paid CEOs on the AP list received packages totaling $538 million, $50 million less than the top 10 in 2007.

Four of the top earners in 2008 came from financial services companies - Goldman Sachs, American Express, Citigroup and JPMorgan Chase. All received money from the government's Troubled Asset Relief Program. But most of their pay was inflated by stock options and awards granted early in the year for their performance the year before. And most of the options are under water. None got bonuses for their work in 2008.

Even more stark was Morgan Stanley's John Mack, who received no raise, bonus or stock options. His salary and perks came to $1.2 million - 97 percent below the $41 million he made the year before. But it could have been worse. Morgan Stanley and Goldman Sachs were the only two of the big five Wall Street investment houses that survived the year.

In some cases, boards offered bonuses but CEOs turned them down.

Directors at General Electric wanted to give Jeffrey Immelt a bonus even though he missed every one of the six performance goals set for him, a list that includes revenue and earnings targets. The company explained in its proxy statement that Immelt "performed well in an extraordinarily tough business environment."

Immelt declined.

"Earnings came in well below where we expected. The broad equity markets, and GE's stock price, declined significantly in 2008," Immelt explained on the company's blog.

Robert Iger, head of Walt Disney Co., gave up a $2.4 million bonus. He was eligible for it partly because Disney stock, which fell 3 percent during its last fiscal year, was less than the S&P 500's 20 percent decline over the same period. (Iger still came in at No. 3 on the AP list for his total package - $51.1 million.)

Iger and others acted in the midst of populist anger over corporate riches at a time of growing economic pain for most of the country.

Already, the government is taking steps to limit bonuses and severance packages at companies that get bailout money. At the same time, those who set executive pay - board members, working with attorneys, corporate human resource officials and outside compensation consultants - are under increased pressure to clamp down, said Brill, the executive pay expert.

"Fear and self-preservation are great motivators," he said. "No one wants to be named in a lawsuit or in any way get negative publicity."

One of the nation's top pay advisers, Frederic Cook, is calling on companies to tie pay to long-term corporate performance, not short-term fluctuations in the stock price.

"The American public and their elected representatives will no longer support companies who put their executives' self-interests and net worth ahead of the company and its stakeholders," Cook said in a March 18 letter to his clients, including McDonald's, Gap and Eastman Kodak.

Some companies are scaling back, with boards or CEOs driving such decisions. Dow Chemical, which shuttered 20 plants and laid off 11 percent of its work force in recent months, gave CEO Andrew Liveris stock awards worth $5 million in 2009, down from $11 million in 2008. Southwest Airlines CEO Gary Kelly voluntarily reduced his base salary by 10 percent, which would bring it down to about $400,000 for 2009, and he won't get a raise until the company's earnings improve.

But some companies are making it easier for executives to come out winners. Some are raising salaries. Others are tossing out old performance factors that tied pay to stock returns and profits and replacing them with measures some pay experts say are easier to achieve, such as revenue and cash flow targets.

Chip maker Altera said it will let the board weigh "significant individual contributions" to justify executive bonuses even when the company "fails to meet a challenging financial performance metric."

Altera also boosted the number of shares of restricted stock given to top executives because their current value is considered too low to retain them. CEO John Daane will be eligible for up to 250,000 shares this year, versus 100,000 in 2008. He stands to make about $2.4 million more from the larger grant, based on the current stock price of about $16.

Given these crosscurrents, it's too soon to say what happens next to executive pay.

Earlier this decade, public outrage followed corporate scandals at Enron and WorldCom, but attention shifted away as the stock market and economy rebounded.

"Every time we are in a crisis, you hear this is it for CEO pay," said RiskMetrics' Bowie. "The reality is, when the crisis passes, things tend to go back to business as usual."

Associated Press Writers Erin McClam, Nicoletta Ratti, Vinnee Tong, Erin Conroy, Tali Arbel and Chris Kahn contributed to this report.

Copyright 2009 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

Ten Surprising Sale Items

Prices of luxury goods and services are being knocked down to earth with unprecedented discounts.

In Pictures: 10 Surprising Sale Items

Trey Shores, 36, recently scored a fantastic deal. The Tokyo-based consultant scooped up an in-season Helmut Lang leather jacket in the city's Ginza district for 50% off the regular price. What was an out-of-reach $2,000 became a more reasonable $1,000 "just like that," says Shores. "I'm quite proud of [it]."

He's certainly not the only consumer benefiting from the financial hardship of retailers. From clothing to travel to cars, companies are being forced to reduce prices at a never-before-seen clip as the global economy continues to shrink.

In Depth: 10 Surprising Sale Items

In the U.S., consumer spending in the fourth quarter of 2008--which accounts for more than two-thirds of domestic economic activity--decreased by 4.3%, according to the Commerce Department. That's the worst decline since the second quarter of 1980. And while retail store sales were up 1% in January 2009 to $344.6 billion when compared with December 2008, and overall consumer spending was up 0.6% during the same period, the government has attributed those increases to massive markdowns on inventory. For many retailers, bargaining with consumers is the only option. In other words, it's a buyer's market.

More Deals, Fewer Restrictions
Kathryn Finney, editor of the the Budget Fashionista, a Web site that caters to fashion-savvy shoppers on a budget, says that right now shoppers are likely to find more deals with fewer restrictions. For example, coupons from department stores typically excluded products from the beauty counter, such as perfume or makeup. Not anymore.

Finney recently used a Saks (nyse: SKS - news - people ) friends and family coupon to buy her favorite Giorgio Armani Hydro Glow foundation at 15% off $57, which knocked the price down to $48.45 (before tax). "I buy most of my makeup at Target, but I splurge on this foundation because of the quality," says Finney. "This is the first time I've ever purchased it at a discount."

And while shoppers are the true winners in this discount war, some retailers are benefiting as well. Take discounted designer goods Web site Bluefly.com. The site is currently featuring several coveted Hermès handbags at up to 40%. You won't find the brand's popular Kelly or Birkin bags, but you will find a gray herringbone twill "Jumping" tote, discounted by 20% to $1,480. Recently, a black pebble leather Bolide was been marked down by 49% from $8,400 to $4,300 (the piece sold out soon thereafter).

Melissa Payner, CEO of Bluefly (nasdaq: BFLY - news - people ), says that exclusive deals like this have kept customers spending. Although Bluefly won't release 2008 full-year and fourth-quarter results until March 11, the company did see significant growth in last year's third quarter. Sales increased by 10% to $19.8 million, and gross profit increased 28% to $7.3 million when comparing both with the third quarter of 2007.

Comment On This Story

"As we've become more well known, more and more designers have become interested in working with us," says Payner. An elevated brand list combined with an overall consumer desire to get more value for their money has aided Bluefly's success. "We've seen growth in our customer file, e-mail subscribers and the word 'Bluefly' as a Google search term."

Automakers finish 2008 on a bleak note. Expect 2009 to be worse.

Investors are preparing to close out the last three trading days of 2008 with Wall Street's worst performance since Herbert Hoover was president.

The ongoing recession and global economic shock pummeled stocks this year, with the Dow Jones industrial average slumping 36.2 percent. That's the biggest drop since 1931 when the Great Depression sent stocks reeling 40.6 percent.

The Standard & Poor's 500 index is set to record the biggest drop since its creation in 1957. The index of America's biggest companies is down 40.9 percent for the year.

With these statistics ready to play out this week, it is little wonder why investors are all too happy to close the books on 2008. Analysts are already looking toward January as a crucial period for the market as it tries to recover some of the $7.3 trillion wiped from the Dow Jones Wilshire 5000 index, the broadest measure of U.S. stocks.

"It is hard to gauge a recovery because there's so many things out there that are interactive with each other," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York. "Nothing is in a vacuum. Anybody who is managing money has to be on the cautious side for at least the first six months of 2009."

He said many analysts are jumping past this week and focusing on next month, especially with Barack Obama set to be sworn in as president on Jan. 20. There is hope that the new administration will deliver another stimulus package, which along with December's interest rate cuts, might help quell the financial crisis.

Trading is expected to remain volatile with many market participants on the sidelines during the holiday-shortened week, but that doesn't mean investors won't be kept busy. With no Santa Claus rally last week, economic data slated for the coming days could sway the market's mood going into 2009.

Investors will be awaiting details about how retailers fared in the post-Christmas sales period, especially since consumer spending drives more than two-thirds of the U.S. economy. The main question is if bargain prices at the malls will be enough to rescue retailers from a bleak holiday shopping season.

Meanwhile, another gauge of how Americans feel about spending money will be released on Tuesday. The Conference Board will issue its December index of consumer confidence, which is expected to rise to a reading of 45.2 for this month, up slightly from 44.9 in November.

The Labor Department will report on weekly jobless claims Wednesday, after a 26-year high of 586,000 initial filings in the week ended Dec. 20.

But the most anticipated economic data will be delivered Friday when investors get a fresh reading on the manufacturing sector. The Institute for Supply Management releases its December survey of purchasing managers.

The index is expected to show a reading of 35.5, down from November's 36.2, according to economists polled by Thomson Reuters. A reading above 50 points to expansion, while a reading below 50 shows a contraction.

There is little in the way of corporate news slated. Though, the final week of the year - when volume is slow and many money managers are on vacation - is often a time when companies slip through lower quarterly forecasts.

Investors were still waiting word if GMAC Financial Services, the financing arm of General Motors Corp., will be eligible for a government bailout. GMAC received the Federal Reserve's approval to become a bank holding company last week, but that was contingent on putting into place a complicated debt-for-equity exchange by 11:59 p.m. EST Friday.

That deadline passed with no word from the company. Analysts have speculated that if GMAC doesn't obtain financial help it would have to file for bankruptcy protection or shut down, which would be a serious blow to parent GM's own chances for survival.

Both General Motors and Chrysler LLC on Monday will receive the first part of the $13.4 billion in emergency loans from the government. Each will receive about $4 billion, then receive the second payment of $5.4 billion on Jan. 16. GM gets a third installment of $4 billion on Feb. 17.

Ford Motor Co. did not participate in the government rescue plan.

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

Biggest Bums Of 2008

About Robert Lenzner

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The biggest bum of 2008 (and for decades prior) is Bernard Madoff, whose knavish duplicity betrayed the trust of small and large investors across the globe. The Madoff Ponzi scheme is a criminal act that has decimated important foundations like the Picower and destroyed the wealth of widows and orphans.

Our bums list should include those conspirators in this scheme (family or otherwise), the handful of investors who claim they knew it was a scam but did not inform the government (they know who they are), the greedy fools behind the feeder funds that facilitated Bernie at his cheating (our sympathy to the family of Rene-Thierry Magon de la Villehuchet, the investment manager who lost more than $1 billion with Madoff and took his own life two days before Christmas).

hat should sit squarely on Madoff's conscience, if he has one. May the smirk on Madoff's face be replaced by the realization he is scoundrel and rogue No. 1 of our age.

A special bum designation is in order for the Securities and Exchange Commission officials who for decades did not bear down in their investigation to expose Madoff's roguish exploitation.

The main lesson from the bum Madoff: Do not keep all your investment eggs in the same basket, or in one investment technique, as it is far too risky. Diversify your investment managers and diversify the investment techniques they use and strategies they pursue.

Make sure your assets are held in your name by a fully insured custodian and that you get immediate transaction notices from your custodian, instead of the monthly reports that Madoff sent, which everyone believes are fiction.

Online retailer Amazon.com Inc. called this holiday season its "best ever," saying Friday that it saw a 17 percent increase in orders on its busiest day - a rare piece of good news in a season that has been far from merry for most retailers, including online businesses.

Amazon customers ordered more than 6.3 million items on Dec. 15, compared with roughly 5.4 million on its peak day last year, the company said. It shipped more than 5.6 million products on its best day, a 44 percent rise over 2007, when it shipped about 3.9 million on its busiest day.

The company did not provide dollar figures and wouldn't say whether the average value of orders had changed, and the jumps it reported Friday are in line with increases Amazon has seen since it started releasing the figures in 2002.

Amazon's best-sellers included the Nintendo Wii game console, Samsung's 52-inch LCD HDTV and Apple Inc.'s iPod touch.

Analysts agreed Amazon's report was good news for the online shopping giant, but they were divided over whether the results indicate strength in online commerce in general.

Forrester Research analyst Sucharita Mulpuru said Amazon's experience shows the current economy is favoring discount retailers, both online and offline.

"The Amazon story doesn't surprise me because Amazon has always traditionally been a leader on price, and they're one of the first places consumers go when they're looking for things online," Mulpuru said. "In many ways they're like the Wal-Mart of the online world."

Wal-Mart is one of very few traditional retailers where revenue has risen this holiday season over last.

Holiday sales typically account for 30 percent to 50 percent of a retailer's annual total, but rising unemployment, home foreclosures, the stock market decline and other economic worries led many shoppers to slash their shopping budgets this year.

SpendingPulse - a division of MasterCard Advisors - said its preliminary data show that online sales fell 2.3 percent compared with the 2007 holiday season, while retail sales overall fell 5.5 percent to 8 percent, including sales of cars and gasoline. The decline was 2 percent to 4 percent when auto and gas sales are excluded.

Online shopping may have gotten a boost from winter storms during last two weeks before Christmas, which made travel to brick-and-mortar stores more difficult.

And, although Amazon's orders rose, the company didn't say whether orders were, on average, worth more or less than last year. Spokeswoman Sally Fouts said the company would release revenue results in its fourth-quarter earnings report, due in about a month.

But she said this was Amazon's "best season ever."

Orders to Amazon on the peak day of its holiday season have jumped in the double-digit percentage range for at least the past 5 years, according to data released by the Seattle, Wash.-based company since 2002. Last year, Amazon's orders spiked 35 percent to 5.4 million at their peak, from 4 million in 2006.

Stifel Nicolaus & Co. analyst Scott Devitt said online retailers' sales tend to grow much faster than those of brick-and-mortar retailers, but he said that difference narrowed this year. That's in part because shoppers tend to go to stores for necessities and online for discretionary purchases, he said. And in an economic downturn, consumers focus on their most-needed purchases and cut back on more frivolous items.

Devitt said Amazon benefited from a vast infrastructure that allows for faster, more reliable shipping than most of its online peers offer. He called Amazon's announcement an "extremely positive data point" and said the company is "uniquely positioned to do well in an environment like this."

That environment has left many retailers in a tough position. NPD Group senior retail analyst Marshal Cohen said they will be forced in coming weeks to take still more drastic measures to drive sales and raise whatever cash flow they can.

Amazon's shares gained 34 cents to close Friday at $51.78, a 0.7 percent rise.

AP Business Writer Lauren Shepherd contributed to this story from New York.

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

They fell from some of the most powerful positions on earth.

In Pictures: 11 Top Bosses Who Got The Boot in 2008

The bloodletting in the c-suite started in 2007. It still hasn't stopped.

Another year goes by and more chief executives get the ax--probably more than in any previous year. People shook their heads when Charles Prince III at Citigroup (nyse: C - news - people ) and Stanley O'Neal at Merrill Lynch (nyse: MER - news - people ) got the boot in 2007. Now it look like they were lucky. They got out just in time.

Martin Sullivan of American International Group (nyse: AIG - news - people ) (let go in June), Kerry Killinger at Washington Mutual (nyse: WM - news - people ) (September) and Richard Fuld of Lehman Brothers (nyse: LEHMQ - news - people ) (leaving next month) are among the biggest names to be shown the door as a result of the economic crisis.

Their distinguished company includes James Cayne of the now-deceased Bear Stearns and Richard Syron and Daniel Mudd, the former CEOs of the mortgage buyers Freddie Mac (nyse: FRE - news - people ) and Fannie Mae (nyse: FNM - news - people ).

"There are two kinds of CEO firings," says Noel Tichy, a professor at the Ross School of Business at the University of Michigan. "There are the crooks and there are the incompetents." This year the biggest departing names all fell into a gray area in between.

None was as corrupt as the executives embroiled in the infamous Enron and Tyco scandals of a decade ago, but you couldn't just say they were simply stupid either. CEOs in the financial services industry discovered that they had allowed their companies to take suicidal risks with other people's money based on bad or staggeringly incomplete information. Many of them have paid with their jobs.

In Pictures: 11 Top Bosses Who Got The Boot in 2008

Despite their prominence, these headline names compose just a small fraction of the 1,361 U.S. CEOs who left their jobs this year through November. That's up from 1,356 in all 12 months of last year. The final 2008 number may prove to be a record, beating the previous one of 1,478 set in 2006, according to data collected by the management consulting firm Challenger, Gray & Christmas.

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“2008 and 2009 Winter Fashion Trends”

2008 and 2009 winter fashion trends. The hottest trends for 2008 and 2009 winter fashion. There are many fashion trends out this season and many involve keeping warm and being fashionable at the same time. When winter rolls around there’s nothing more fashionable then keeping warm. That’s the best fashion trend to ever exist for cold weather.

For us true fashionistas here are the hottest trends to follow for winter 2008 and 2009. 

  Black Lace

Colorblock

 Leather

 Leather Leggings/ Pants

 Fur Trims

  Cardigans

  Dolman Sleeves

  Glitter/Sequins

Colored tights/ jeans

 Scraves

 Plaid

 Blazers

 Fringes

Belted Sweaters, jackets etc