Stock options are as out-of-date as grunge fashion, brick cell phones and the Walkman.

That's the general trend in executive compensation across the Northwest and the nation, according to researchers, who say a combination of factors ? from accounting rule changes to backdating scandals to shareholder activism ? is leading compensation committees away from granting stock options to CEOs and other key employees.

"I think it is the shareholders. I think it is the accounting scandals and the legislation," says Evren Esen, a researcher with the Society of Human Resource Management in Alexandria, Va. "They're all making shareholders more concerned with the issue, wanting to at least know and at least see how much CEOs and executives are making."

Esen's survey of HR professionals, conducted in December 2005, showed that two-thirds of publicly traded companies had reduced the use of stock options to compensate top-tier executives, while increasing the size and number of cash bonuses.

A separate study by management and accounting consultants Grant Thornton LLP found that two-thirds of U.S. technology firms plan to decrease or eliminate stock-based compensation. Tech industry stock options made millionaires out of a lot of Seattle-area people during the height of the dot-com boom, and not just CEOs. Internet start-ups tried to conserve cash by offering equity options. Under the accounting rules of the time, stock options didn't have to be counted as an expense against the bottom line, and that helped slow down the rate at which these companies burned through their venture capital.

"You can see how a firm might be predisposed to use a stock option," says Swami Kalpathy, a Washington State University business professor who studies executive compensation. And with stock values soaring during the ?90s tech boom, everyone from experienced managers to rookie programmers was happy to take them.

But after Y2K, stock options emerged as a major headache for directors and shareholders. "What we saw was Enron, Tyco, Waste Management," Kalpathy says. "CEO compensation was out of whack with what was good for shareholders."

That led to legislation and accounting rule changes intended to ensure more transparency in CEO pay ?  most notably, the Financial Accounting Standards Board's Statement 123(R), which took effect in 2005-'06 and requires firms to expense stock options at their fair value.

That eliminated the advantages of option-based compensation for companies ? and created more transparency for increasingly wary shareholders.

"It was easier in the past to provide (options) and then keep it from the shareholders in terms of the total worth that an executive would be reaping from them," Esen says. "It's easier to account for cash. It's easier to report on that. It's more transparent than with stock options."

The new rules perhaps affected Washington companies disproportionately, Kalpathy suggests. "We find more tech-oriented companies here. They have been more active users of non-cash-based compensation."

InfoSpace Inc., for example, reported paying CEO James Voelker a salary of $400,000 in 2005. With bonuses and other payments, his compensation totaled $576,300. That jumped 10-fold in 2006, once InfoSpace was required to expense the value of his stock options. Under the new rules, his compensation totaled more than $5.4 million, enough to put him at No. 10 on the list of top-paid CEOs.

At another tech company, Expedia, the reported compensation of CEO Dara Khosrowshahi jumped from $1.2 million in 2005 to $4.8 million in 2006, once the company had to report the value of his stock options.

Yet his actual take-home pay was higher, according to analysts at Watson Wyatt Worldwide, who compiled Washington CEO Magazine's annual list of the state's top-paid executives. Once you factor in the value of options granted in previous years, Khosrowshahi's total direct compensation was more like $16.4 million, they calculated.

Stock options haven't gone away completely, Kalpathy says. "Some amount of equity compensation is good," he says, because it gives executives incentive to do things to benefit shareholders.

However, directors are being more selective in how they structure option deals. Instead of having them vest automatically after three to five years, boards are offering performance shares ? options that vest after the CEO or company hits a specific target, Kalpathy says.

Usually that means an accounting-based goal ? a specific profit margin, or top-line growth figure ? or a stock-price target. But the targets can be qualitative as well, he says. Biotech firms, for example, will offer options that vest if a company successfully gets a drug to the next phase of clinical trials. Other bonuses are tied to whether CEOs can increase customer satisfaction ratings.

But Esen said the overwhelming majority of incentives remain tied to the top and bottom lines. Her survey found that only 10 percent of companies link executive compensation to ethics considerations.

"What drives organizations are profits and containing costs," she says. "As long as that's what (executives) are getting paid for, that's probably going to be their focus."

Not everyone thinks pay for performance is possible ? or even desirable. "It's one of several things from the Harvard Business School that makes me scratch my head," says T.M. Sell, a professor at Highline Community College in Des Moines.

Tying executive compensation to things like stock price targets can even be counterproductive, Sell suggests. "If your whole goal is to get your stock price over some barrier ... that encourages people to do really stupid things."

However, comparing the Watson Wyatt salary numbers to 2006 stock performance shows that some shareholders got a good bang for the big bucks paid to the top CEOs.

The 12th-highest-paid CEO, Peter Rose at Expeditors International, increased his company's share price by 20 percent and paid out 22 cents a share in dividends, while his total compensation rose by 11 percent. Likewise, Nordstrom Inc.'s share prices grew more than twice as fast as CEO Blake Nordstrom's paycheck during the year.

In a couple of cases, companies saw their stock price increase by double-digit margins, even as their CEOs' pay fell. At Puget Energy, share prices grew by 30 percent, while CEO Steve Reynolds' pay fell 29 percent, to $3.1 million. (Don't feel too bad for him; his wife, Safeco chief executive Paula Rosput Reynolds, brought home nearly $13.9 million worth of bacon last year.)

Likewise, the top-paid CEO, Washington Mutual's Kerry Killinger, saw his compensation fall from $22.3 million to $18.1 million, even as WaMu shareholders benefited from a 9.6 percent increase in share price.

On the other hand, while Khosrowshahi's compensation soared 15-fold in 2006, shares of Expedia fell by 12.4 percent, to $20.98 a share.

Generally speaking, Sell says CEOs at large companies are overpaid, considering what they bring to a company. "The best six months of Boeing's existence was when they had no CEO," he says, referring to the record sales growth and profitability the jet maker had in 2005, after it fired Harry Stonecipher and before it brought in Jim McNerney to replace him as chief executive.

However, pay for talented executives is likely to increase, Kalpathy predicts. For starters, companies are becoming larger and more complex, so it stands to reason that the CEOs that run them would be paid more. CEOs also are getting less time at the top. The average tenure of a chief executive has fallen from eight years to five. That's driving more top executives to make as much money for themselves as they can, Kalpathy says.

Finally, the surge in private equity has sparked a bidding war, pulling the best executives away from public companies, offering them bigger paydays to restructure and run companies that the same funds are buying out and taking private.

With talent scarce to begin with, and equity players bidding for proven performers, "it requires more money to be hired and to retain," Kalpathy says. "If you have only that many CEOs available, you can imagine what it takes."

Bryan Corliss is a senior writer at Washington CEO Magazine.