Nor would it shock anyone to learn that Lennert J. Leader, president of an AOL subsidiary, appears as the No. 2 performer on the list. As the key money man of the high-flying Internet giant, he racked up $26.8 million, mostly by exercising stock options.

But who is Gerald W. Thames? And how did he pull in $20.8 million in salary, bonus and stock gains — enough to make him the third highest-paid executive, based on compensation figures included in proxy statements of publicly traded Virginia companies?

Thames is executive vice president of Global Telesystems Group, a company with a $4 billion market capitalization. Virtually unknown outside the telecommunications industry, Global Telesystems is building "backbone" telecommunications services in Europe and long-distance links between the United States and Europe. Thames, the former CEO, led the company through an initial public offering in 1998 that netted $236 million. The company raised another $1 billion through subsequent stock and bond offerings.

In March, Thames turned the reins of Global Telesystems over to H. Brian Thompson, who has appeared in past rankings of Virginia's Top Paid 100 as CEO of LCI International, which was acquired last year by Denver-based Qwest Communica-tions. Thompson didn't make it onto this year's list, but we picture him here as the face of the future — the heavily optioned CEO of a go-go telecommunications company. A spokesman for Global Telesystems told Virginia Business that despite Thames' impressive compensation, Thompson is likely to make even more.

Thompson's base salary of $600,000 is, in fact, substantially higher than Thames' $395,000, but the main motivator for this veteran telecommunications executive is stock options. His contract awarded him options on at least 1.5 million shares. So a $1 per-share gain on those options could easily be worth as much as his salary and bonus combined.

Certainly, the potential exists for explosive growth. "We are the most formidable competitor" among European telecommunications companies, most of which have only recently been forced to compete, Thompson says. "We have more than 700 sales people in Europe, and we are taking a hard look at what we might do in the United States."

Analysts say the company could do for Europe what MCI and Sprint have done with long-distance and local service stateside. But it's too early to tell whether Thompson can deliver. "So far, so good," says Peter Treadway of Ryan, Beck Investments in New York. "GTS has made a couple of big purchases this year, and these have to be integrated into the company's system, and Thompson will be responsible for doing that. The jury's not in."

The price of Global Telesystems' stock, which peaked at $45 this summer, has tumbled to the low 20s. Treadway attributes the stock's poor price performance to interest rates, which were rising while the company was borrowing money, and to a change in investor psychology. People have begun to worry that a glut of bandwidth is developing in global markets, he says.

So Thompson's return to the Top Paid 100 is not a "gimme." There are no guarantees on Wall Street. That's why the Virginia Business Top Paid 100 list does not count stock options as compensation until executives actually exercise those options. At that point, we calculate the "net value realized," the compensation generated by the gap between the option price and the market price on the day the options were exercised.

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Cynics might point out that corporate America's conversion to stock options coincides with the greatest bull market in U.S. history, and that the maximum tax on capital gains is only half the tax on salaries and bonuses. Cynics might further note that shareholders owe as much of their stock appreciation to Alan Greenspan as to America's CEOs.

Under Greenspan's guidance of the Federal Reserve, interest rates have plummeted over the past two decades, justifying much higher earnings multiples for stocks. To the extent that higher stock prices — and the soaring value of stock options — reflect lower interest rates, CEOs are getting a free ride. Finally, cynics might predict that should the bull market ever falter, executive compensation might migrate back to salaries, bonuses and traditional perks.

Perhaps. But the switch to at-risk compensation packages seems to represent a fundamental shift in the philosophy of corporate governance: CEOs should prosper or suffer along with shareholders.

At least two executives on our list have carried that philosophy to an extreme: Nigel W. Morris, president of Capital One, is ranked fourth on the list, with $20.6 million. He didn't pocket a dime of salary or bonus. His entire compensation, all stock gains, was at risk. Given the hypercompetitive nature of his business — credit cards — and its vulnerability to outside forces, such as shifts in interest rates and other economic conditions, there's no guarantee that Capital One stock will continue to surge. Depending on the vagaries of the stock market, he could be working for free next year.

Michael A. Daniels, chairman of Network Solutions, also pocketed no salary or bonus. His entire $2.3 million in compensation came from stock gains. Daniels is in an unusual situation, however. He's also executive vice president of Science Applications International Corp., and his compensation from that company is not reported by Network Solutions. Daniels filled in as acting CEO after Gabriel A. Battista, No. 10 on this year's list, resigned in November 1998 to take a job with Talk.com.

Future stock gains are far from assured at Network Solutions. The company got its start as the monopoly keeper and administrator of Internet domain names. That monopoly ended this year. So to bolster its stock price, Network Solutions must fend off a host of competitors and create new revenue-generating products, such as its directory of commercial Web sites.

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