Stocks may fall, but pay doesn't

— -- Warren Buffett says it's only when the tide goes out that you learn who's been swimming naked.

If that's the case, investors should keep their children away from the beach this proxy season, because the tide went way, way out for Corporate America in 2007, exposing all sorts of embarrassing details about business strategies and CEO compensation.

How embarrassing?

But CEO Jeffrey Mezger weathered the storm. In addition to his $1 million base salary, he was awarded a $6 million cash bonus for 2007. In explaining the bonus, the board of KB Home said Mezger exceeded the objectives set for him, which included strengthening the company's balance sheet and rebuilding the senior management team.

So it goes in the topsy-turvy world of executive compensation, a land like Garrison Keillor's Lake Wobegon, where each CEO is above average.

"This shouldn't be like the fourth-grade soccer team, where everybody gets a trophy," says Nell Minow, editor at The Corporate Library, a governance research firm. "This is the big time. This is why they pay these guys the big bucks."

Do they ever. A USA TODAY review of CEO pay for 50 of the largest companies in the Standard & Poor's 500 showed the median compensation last year was $15.7 million. The analysis includes data for companies that filed their proxies by the end of March. And as KB Home illustrates, smaller companies also compensate their CEOs very well.

Under reporting rules adopted by the Securities and Exchange Commission, public companies have to disclose the compensation paid to the top five named officers each year. Data for USA TODAY's CEO compensation survey were compiled from these SEC filings by Salary.com. CEO compensation consists of base salary, cash bonus and incentive awards, grants of stock and stock options, as well as perquisites. In its calculations, USA TODAY does not include stock and options awards made in prior years but accounted for in 2007 proxy statements.

Despite the economic downturn in 2007, it's easy to see that CEOs as a whole fared better than investors.

"There are a few laws of pay-physics," says Bill Coleman, chief compensation officer of Salary.com. "The first is that it rarely goes down."

When times are good, as they were for financial firms, mortgage lenders and home builders through 2006, CEOs and shareholders alike made lots of money, and few complained.

But the bursting of the real estate bubble last summer caused credit markets to seize up and destroyed hundreds of billions of dollars of shareholder value. The fallout from the credit crunch sowed panic in the markets, spurring the Federal Reserve to lower interest rates. The lower rates contributed to higher oil prices, which, in turn, slowed the economy, depressing home prices even further.