There could be an opportunity to tweak the way we pay CEOs of big public companies. I hope this doesn't sound too harsh. But when you consider that the average 2008 compensation for the 10 highest paid public company CEOs was $40.7 million, while their companies lost half, or $30 billion, worth of their stock market value -- I wonder whether some change may be in order.

The year 2008 put a big exclamation mark on, hopefully, the end of an eight-year sentence of stabbing common shareholders in the back. Of the 10 highest paid CEOs, here are the four who destroyed the most stock market value while getting well above average pay. The companies are listed in descending order of the percentage destruction in stock market value, along with the CEO's 2008 compensation and loss in stock market capitalization:

• Citigroup (NYSE: C) paid CEO Vikram Pandit $38.2 million while its stock fell 78% destroying $124 billion in stock market value
• Motorola (NYSE: MOT) CEO Sanjay Jha made $104 million while overseeing a 75% stock plunge which wiped out $27.9 billion in stock market value

In recent public remarks, U.S. Treasury Secretary Henry Paulson indicated that it was not the government's job to regulate executive compensation, but that he understood how reluctant investors are to reward failure. Secretary Paulson stated that executive compensation should be tied to performance, but he declined to state what specific performance factors should be considered. What exactly should corporate boards measure when linking executive pay to performance? Share price is a poor measure of management abilities since share price is subject to market forces completely beyond management control. Profits and EPS can both be easily manipulated. In a recent issue of CFO Magazine, Don Durfee examined the problems with performance-based pay packages.

Options for performance-based pay include a multi-year target for economic profit, or whether the company's stock hit a predetermined price per share, or whether specific cash-flow or shareholder return number are met. There is almost no end to possibilities for performance-based pay. Some companies reward executives with time-vesting restricted stock, now that all stock options must be expensed according to FASB 123R. But this type of restricted stock rewards executives merely for sticking around without getting fired, indicted or forced to resign.

According to Durfee, many companies are using total shareholder return, TSR, an external market factor, to measure executive performance. TSR of a company's stock is measured against a group of its peers. If that stock meets or exceeds TSR for the peer group, then executives earn additional compensation. But not every business operates the same way to create TSR. Return on invested capital is a good measurement in the manufacturing sector, but cash flow per share makes more sense in the financial services industry.

In a recent study of executive compensation, the companies directed by the 12 highest paid CEOs outperformed their market peers only one-third of the time in terms of shareholder value. So just what are the boards, and ultimately the investors, paying for?