CEOs had a rough 2008. First, their image sank to new lows as the Wall Street and economic collapse fanned public outrage. Then most, even those far removed from the financial sector, took a blow to their wealth, as well.

That’s clear now that U.S. companies are deep into the period in which they tell shareholders how much top executives earned in 2008 — a year when most Americans got a refresher course in financial pain.

Take the apparent 2008 compensation champion for CEOs of Standard & Poor’s 500 companies: Chesapeake Energy’s Aubrey McClendon. On paper, his compensation totaled $112 million, including a $77 million bonus that was more than three times larger than any other CEO’s and came in a year when the natural gas producer’s stock fell 58 percent.

While it might be hard to muster sympathy, 2008 was difficult financially for McClendon, 49. The co-founder of Chesapeake owned 5.5 percent of the company, a stake worth $2.3 billion when the stock peaked at $74 in July, ranking him 134th among the “Forbes” 400 richest Americans.

But McClendon gambled on the success of his company and bought Chesapeake stock on margin; when his stock tanked, he was forced to sell almost all his shares for $595 million in October to cover a margin call. That left him about $2 billion poorer. He may never see the “Forbes” list again.

That was an extreme example of what a subpar year it was for CEOs in almost every compensation category. An analysis of executive compensation data provided by The Associated Press found that the median salary of a CEO running an S&P 500 company rose 3 percent last year to surpass $1 million. The median bonus and other incentive cash dropped 27 percent to $1.3 million, and total compensation was down 7 percent to $7.6 million.

In many cases, it was worse than it looked, because Securities and Exchange Commission rules require companies to value options and other stock grants based on the dates they were granted. According to AP, 90 percent of the $1.2 billion in CEO options granted last year are under water, which means the current stock price is too low to yield a profit.

The examination was of 387 S&P 500 companies that filed proxies this calendar year through April 20.

Salaries Still Not Shabby

But don’t go looking for CEOs in bread lines just yet. The brutal bear market that hurt them so badly in 2008 could actually help them later by creating ripe conditions for huge potential paydays. Because of 13-year lows in stocks in early 2009, most CEOs received additional stock grants and stock options this year at fire-sale prices.
American Express CEO Kenneth Chenault was fifth-highest in total compensation last year, making $43 million. Like others, his numbers overestimate actual wealth creation. His stock options and stock awards were valued at $34 million when issued, but by early March, AmEx stock fell below $10 a share, making Chenault’s options going back years all but worthless. AmEx stock fell 64 percent last year and lost 63 percent in a three-year period (2006-08).

However, Chenault was issued 1,196,888 stock options in January 2009 at a strike price of $16.71, says AmEx spokeswoman Joanna Lambert. Stock options let you buy a stock at a set price during a set period of time. Any gain in the stock from that set price is a profit when the option is exercised.

For Chenault, that means his paper wealth rises nearly $1.2 million for every $1 the stock price rises above $16.71. With the stock now at $24.29, those options are already in the money by $9.1 million, and if the stock recovers to the $49.13 level of last year, they will be worth nearly $39 million.

That’s a good example of the significant gains many CEOs will see when stocks rebound, says Jay Fishman, CEO of Travelers. “Some of these grants could end up being worth substantial sums one day. I hope so, not for my sake, but because it means the economy has gotten better.”

Been There, Done That

CEOs have recovered quickly from bad patches before, says Sarah Anderson of the Institute for Policy Studies, a liberal think tank. In 2001, the average total CEO compensation was $11 million, but the bursting of the dot-com bubble and recession dropped that to an average $7.4 million in 2002 and $8.1 million in 2003. By 2004, it was back to $11.8 million, Anderson says.

Cisco Systems’ John Chambers had stock options worth $1 billion in 2000, but they were driven underwater when Cisco’s stock price fell from $77 a share in March 2000 to about $11 a share by September 2002. Chambers was granted 14 million more options between 2001 and 2003. By 2004, they were valued at $224 million, Anderson says.ln