Jun. 6--and Jack Davis

Silicon Valley companies are relying less on stock options -- the rocket fuel that propelled them in the past few decades -- and more on performance-based stock awards to compensate their chief executives, a trend that makes valley companies more like the rest of corporate America.

Five years ago, options made up nearly two-thirds of CEO compensation in the valley, but this year, that figure was 38 percent, the lowest since the Mercury News' "What the Boss Makes" survey began two decades ago. Options are typically awarded regardless of whether objectives are met.

At the same time, "restricted" stock -- awards of which are tied to some kind of performance standard -- made up a quarter of valley chief executives' pay packages, the most ever, bringing it closer to the 33 percent share among the companies in the Standard & Poor's 500.

This year's "What the Boss Makes" survey covers the period for fiscal years ending from March 31 to Dec. 31, 2008.

For the first time in the survey, a majority of the CEOs in the valley's 150 biggest publicly traded companies received restricted stock as part of their compensation. That means many top CEOs will be paid in full only if they increase profit and remain on the job for several years.

Among the other findings of the survey, conducted for the Mercury News by Equilar, an information services firm specializing in executive compensation

research:

--The median pay package for a Silicon Valley CEO fell 5.6 percent last year, to $2.2 million. That compares with a decline of 7.5 percent among the Standard & Poor's 500 group of companies, to $8 million.

--Bonuses awarded to the valley's CEOs fell 31 percent, to a median of $242,000. That drop was bigger than in the S&P 500 companies, where bonuses were down 22.2 percent.

Performance-based stock awards -- those given for meeting criteria such as the price of a company's stock or increases in its revenue -- are on the rise nationally, too, in the midst of an uproar over CEO pay at failing financial companies.

"There are stronger trends toward linking performance criteria to these awards," said Emily Cervino of the Certified Equity Professional Institute at Santa Clara University. "Shareholders are bent out of shape by economic loss and executives taking home sizable paychecks," she said.

Awards of restricted stock better align CEOs' interests with those of shareholders, said Charles Elson, director of the Center for Corporate Governance at the University of Delaware.