The take-home pay of U.S. chief executives grew at least 10 percent in 2011, propelled largely by a stock market rally, according to consultants' estimates.

The trend may carry over into 2012 if the market stays strong, with CEOs reaping the gains from low-priced stock options and restricted stock which they received in the darkest days of the 2007-2009 financial crisis and which are now vesting.

Corner-office bonus and salary gains were held back last year by corporate boards enforcing tough performance goals.

The Wall Street Journal reported last week that CEOs of 65 companies in its study with pay consultancy Hay Group got a modest 1.4 percent increase last year in direct compensation. That includes salary, bonus and the value of stock and option grants at the time they are granted.

For some executives, however, that frugality was more than offset by outsized equity award gains, a shift that in itself raises corporate governance questions, experts said.

I expect equity appreciation will override any conservatism in bonus for 2011, said David Wise, senior principal for Hay Group. He expects 10 to 20 percent growth in 2011 CEO realized pay, or take-home pay.

Companies are still filing the proxy statements that detail executive pay, and total figures will not be available until later this spring, but early filings highlight the trend.

Aaron Boyd, research director at pay consultants Equilar, also expects realized pay to have risen by double digits as the stock market rallied in 2011.

Equity pay such as options and restricted shares make up most of the pay of CEOs and their top command.

Among CEOs whose realized pay jumped in 2011 was Qualcomm Inc's Paul Jacobs, who got $35 million in 2011 versus about $8.5 million in 2010, according to regulatory filings. The big driver behind the increase was a $29 million gain on stock options he exercised. Qualcomm declined to comment.

Visa Inc CEO Joseph Saunders' take-home pay hit $8 million in 2011, up $2 million from 2010. His 2011 package got a lift from the vesting of $3.9 million in restricted stock.

Visa only began making equity grants after it went public in 2008. Saunders' take-home pay grew as more awards vested in 2011 than the year before and the number of grants increased, a company spokeswoman said, noting that Visa's stock price was not a factor. Realized pay approximates what a CEO might file as income on an annual tax return. It includes salary, bonus, exercised options, vested restricted stock, and other pay-outs in cash and shares, as disclosed in regulatory filings. It does not include grants of options and stock that vest in future years.

SCHULTZ'S 'TRIPLE VENTE' PAYCHECK

For Starbucks Corp CEO Howard Schultz, realized pay hit $41.2 million last year, up from $29.5 million in 2010. Some $36.8 million in exercised options gave him a big boost.

Schultz's pay has been controversial, particularly a 2.7 million share option grant he received in November 2008 that was much larger than the prior year's. It had an exercise price of just $8.64 per share.

Estimated to be worth $12.4 million at the time, the grant has exploded in value as Starbucks stock has climbed from a 5-year low of $7.83 on November 22, 2008 to above $56 on Monday.

The Starbucks board believes weighing Schultz's compensation toward long-term incentives reflects his responsibility for performance, company spokesman James Olson wrote in an email.

When Starbucks and other companies made stock options grants back in 2008, there was no guarantee that the companies would succeed, Olson wrote. The CEO doesn't obtain value unless the company succeeds under his or her leadership.

Mega grants of 500,000-plus shares were rare between 2000 and 2008 but made a comeback in 2008 and 2009, according to research by Paul Hodgson and others at GMI Ratings, a corporate governance watchdog.

The Dow Jones industrial average hit a 5-year low of 6,470 in March 2009, around the time when most companies were setting executive pay targets for the year.

While boards may have been trying to boost executive morale, as earlier grants were in the red, the timing of the late 2008 and early 2009 grants mean that today many of them look rather super-sized, with the benchmark Dow index back over 13,000.

WINDFALL GAINS A RISK

Large, low-priced stock grants risk giving executives a windfall gain when really maybe all they did was ride the market back up, said Matt Turner, a managing director at compensation consultants Pearl Meyer & Partners.

He said the 2009 experience should alert boards to the potential outcomes of generous grant award programs.

The stock market's rise is having only a modest effect on pay at Wall Street banks, which have moved solidly away from big options grants, according to Alan Johnson, whose firm Johnson Associates specializes in compensation consulting for financial firms.

Banks are granting fewer options due to government oversight and conservative boards. Instead, they are relying more on restricted stock as an incentive, which pushed up take home pay in 2011, but not as dramatically as options would have and not enough to overcome weak cash compensation, Johnson said.

Overall, pay for senior professionals on Wall Street last year came to what they were paid back in 1998 after adjusting for inflation, he said.

Johnson is one of a number of pay experts who said companies should go back to using more options, both as an incentive for executives and to tie their interests closer to shareholders'.

A decline in options may be one reason companies have been slow to make investments, do mergers or acquisitions, and take risks in general, argued Don Delves, a Chicago pay consultant.

We now have companies that are not taking enough risk, Delves said. Low levels of options in pay is either contributing to or reflecting that malaise.

(Reporting By Nanette Byrnes in Chapel Hill, N.C.; Editing by Kevin Drawbaugh and Richard Chang)

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