(FORTUNE Magazine) – FROM EUROPE to the Orient, top managers are strikingly underpaid compared with their U.S. counterparts. Chief executives of 24 U.S. companies, including Du Pont, Sara Lee, Toys ''R'' Us, and Lotus Development, earned $5 million or more last year, counting bonuses and profits from the exercise of stock options. Some 300 CEOs earned at least $1 million. Second bananas did pretty well too. More than 100 assorted vice chairmen, chief operating officers, and executive vice presidents took home total compensation that topped the $1 million mark. Million-dollar-a-year packages for any executive are about as common in Europe and Asia as Cadillac stretch limousines. A. Daniel Meiland, a Dane who heads the North American offices of executive search firm Egon Zehnder, figures that no more than 30 chief executives of large European companies earned that much in 1987. The number in Asia is probably even smaller (see box). ^ The vast difference between the U.S. and the rest of the world has persisted despite the marked appreciation of many currencies against the dollar. It stems from deeply rooted differences in history, culture, and government policies. You could argue, as many critics do, that Americans make too much. Whether that is so or not, the disparities have grown so great that some adjustment is due. Since U.S. chief executives are unlikely to cut their own pay, look for Europe, if not Asia, to catch up fast. Among Europeans the Germans have gained the most ground so far. The average pay for heads of West Germany's five largest industrial companies -- among them automaker Volkswagen and electronics producer Siemens -- was $1 million (vs. $2.8 million for the top five in the U.S.). Though a few Britons, mainly in financial services, have soared into American salary ranges, the average for the largest British companies was $500,000. In France chief executives of the dozen largest companies, a group that includes automaker Renault and industrial gases producer Air Liquide, earned an average of $400,000.

Most striking is how poorly paid are Europe's superstars, managers who have helped shape some of the world's best companies and made billions of dollars for shareholders. Anders Scharp, who has turned Sweden's Electrolux into the world's largest appliance maker, with $10.6 billion in sales last year, had total compensation of just $437,000. Jack Welch at General Electric was paid $2.1 million in salary and bonuses and exercised $10.6 million of stock options. Sir Peter Walters has guided British Petroleum's transformation in this decade from a stodgy state-owned company into a nimble private producer. Yet Walters earned just $582,000 last year, small change alongside Exxon Chairman Lawrence Rawl's total compensation of $5.5 million. Europe's Lee Iacocca -- in performance, not pay -- is Jacques Calvet, president of French automaker Peugeot. Since 1984, Calvet has steered Peugeot from near bankruptcy to robust profits, boosting the company's market value more than ten times, to nearly $5 billion. Yet Calvet, who works in a small office and locks his phone to prevent unauthorized calls, earned about $250,000 in 1987. That is less than 2% of Iacocca's average compensation of $16 million annually for the past three years, including proceeds from stock options. A pretty good bargain. (Iacocca did, however, work for $1 in 1979, the year Chrysler negotiated its bailout by the government.) WHY ARE pay packages so much lower in Europe than in the U.S.? The explanation begins with the way executives are paid in different countries. The bonuses, stock options, and other types of variable compensation that propel U.S. paychecks into the millions are far less lavish in Europe. American compensation packages typically have three main elements: base salary, a bonus based on the most recent year's performance, and long-term compensation, ranging from stock options to cash payments based on the company's results over three to five years. In a study of the 100 largest U.S. companies, the consulting firm Towers Perrin Forster & Crosby found that chief executives' pay averaged over $1.5 million. Of that, only $600,000 came from salary; the one-year bonus and long-term compensation added $940,000. A shift in Europe toward U.S.-style compensation should prove a key trend in the next several years. Stock options, nonexistent just four years ago, are catching on fast. Says Arthur Bierwirth, an international compensation specialist with Towers Perrin in New York: ''The increase in variable compensation could make hundreds of European executives very wealthy in the 1990s.'' Spurred by the European Economic Community's drive to remove all barriers to trade by 1992, companies are starting to treat Europe as a unified market, not just for products but for managers as well. Competition for top talent is heating up. Says Robert Mosley of Hay Management Consultants in London: ''Today in Europe you have to pay well to attract the best.'' Executive search has become a growth industry. Companies that once promoted mainly from within now raid competitors for chief executives or senior managers. Many European executives so far have seemed less interested in money than their American counterparts. Says Victor Dial, an American who heads sales for Peugeot and was formerly a top executive with Ford of France: ''In Europe the greed factor is lower than in the U.S.'' Loik Le Floch-Prigent, who led France's state-owned chemical giant Rhone-Poulenc to a spectacular recovery, is a prime example. Jovial and hirsute, Le Floch-Prigent lives in a spartan apartment complex in a working-class neighborhood on the outskirts of Paris. He drives a Renault 5, basic transportation for recent college grads. As chief executive from 1982 to 1986, Le Floch-Prigent, 45, earned about $150,000 a year. He got no stock options, bonuses, or golden handshakes. Now he is a leading candidate for the top job at France's biggest company, state- run oil producer Elf-Aquitaine -- where he expects to earn another lean paycheck. To Le Floch-Prigent, that's okay: ''Some people want to make money and show it off. I want to create.'' Culture plays a role. Europeans generally consider displaying wealth -- and sometimes even accumulating it -- to be gauche. Says Erik van Galen, an executive search consultant for Boyden International in Paris: ''A Frenchman would much rather show off the Renoir he inherited than say he makes $1 million a year.'' Typically the future captains of French industry graduate from the Ecole Polytechnique and the Ecole Nationale d'Administration, prestigious training grounds for public service, then spend at least a decade working for the government. At age 35 or 40, when they leave the ministry of industry or finance to take a top industrial job, their new salaries seem like a fortune compared with puny government wages.

In the 1970s British managers were not overly concerned with making money for themselves -- or sometimes even for their companies. Says Don Young, personnel director at British electronics company Thorn EMI: ''The old guys were more concerned with belonging to the right clubs and having separate executive lavatories.'' It's not that Europeans can live more cheaply than Americans. A two-bedroom apartment in a chic Paris neighborhood sells for $600,000, and lunch for two at the restaurant Laurent near the Champs Elysees runs $250. A three-bedroom house in the Frankfurt suburbs costs $650,000. Though personal income taxes have come down a bit, they are still far higher than in the U.S. The top marginal rate is more than 80% in Sweden, 57% in France, and 40% in Britain. In addition, value-added taxes on consumer products range from 38% in Italy to 12% in Spain. American executives assume that their European counterparts make up for lower pay with fancy perquisites, and to an extent they're right. According to a Towers Perrin study, perks add from 4% to 13% to compensation in most European countries, compared with 2% in the U.S. Jan Carlzon, the president of Scandinavian Airlines System, earns around $400,000 a year and also gets the use of a luxurious suburban villa near Stockholm owned by the company. Corporate cars frequently come with the top jobs. Kent Price, chief executive of Chloride Group, a British battery producer, drives a $45,000 company-owned Daimler 3.6. Still, that era may be ending. Though companies are not taking perks away, neither are they creating new ones. And many governments have begun taxing fringe benefits. Italy, among other countries, has closed the loopholes for company housing, insurance, and free travel for spouses. The relatively high pay in West Germany stems mostly from a boom in bonuses. Stock options are effectively banned because of onerous tax laws. While bonuses at the big manufacturers and banks seldom exceed 40% of salary, aggressive companies in such businesses as publishing and retailing are jacking up the limits. At Bertelsmann, the $4.7-billion-a-year publishing house, top executives can earn up to 60% of their salary in bonuses. Last year a fat bonus helped lift the compensation of Bertelsmann's chief executive, Mark Wossner, to around $1.7 million. A pay revolution is shaking Britain. Prime Minister Margaret Thatcher's bracing brand of capitalism brought not just tax cuts and high profits but also a profound change in public attitudes. Big pay packages are no longer frowned upon. High-paid executives have been transformed from robber barons to folk heroes. Says Young of Thorn EMI: ''The new managers simply want to perform well and be rewarded for it. They aren't ashamed of what they earn.'' American-style bonus plans tied to performance are proliferating. At Woolworth, a onetime British subsidiary of the American retailer that is now independent, Chief Executive Geoffrey Mulcahy should receive an estimated $510,000 on top of his salary of some $340,000, assuming the company's profits live up to projections. Mulcahy's contract awards him 1.5% of base pay for every $1.7 million in operating profit the company makes over $94 million. Britain's biggest bonus winner is Christopher Heath, 42, managing director of Baring Securities, a London firm that sells Japanese stocks to European clients. Heath's base salary comes to just $220,000, with bonuses tied to how well he performs. In Heath's case the performance has been nothing short of sorcerous. He has multiplied net earnings some 25 times in four years, to $50 million. The surge in profits produced a bonus of almost $4 million in 1986, or 18 times his salary. Last year, according to one estimate, Heath's compensation soared to over $6 million. When the news of this bounty broke, dozens of TV and newspaper reporters camped out in front of Heath's Kensington home -- for he was judged to be Britain's highest-paid boss and was therefore an instant celebrity. The tone of the coverage demonstrated how much attitudes have changed in the past decade. Heath was portrayed as a laudable entrepreneur, not as some kind of Ebenezer Scrooge. Because he thought the attention would be good for his firm, he even posed for photographers at home while petting his dog. Britons have learned, though, that performance-based bonuses cut two ways. When Cable & Wireless's earnings dropped this year, so did Sir Eric Sharp's pay. The chairman earned $350,000, down 19% from the previous year. Along with fat bonuses, Britain has begun offering that other ticket to fortune -- stock options. Rights to buy shares on a future date at a fixed price, usually the price prevailing when they are granted, options can be fabulously lucrative if the share price rises sharply by the time they can be exercised. Thanks to new tax breaks, the granting of options took off in 1985, but since they must be held at least three years, few have been exercised so far. When the big cash-out comes, executives should reap handsome gains. On average, stock options granted in 1985 are now worth 120% to 150% of an executive's annual salary. FRANCE is about where Britain was a few years ago. Nationalized companies are notoriously tight. With a salary of about $150,000, Air France's newly appointed president, Bernard Attali, earns less than many of the line's pilots. Nor are private-sector companies always more generous. Automaker Peugeot and tire manufacturer Michelin are both controlled by families who don't believe in bonuses or options.

The heads of the big French banks -- Societe Generale and Credit Lyonnais, for example -- often earn less than the men running the French subsidiaries of Bankers Trust, Citibank, or other U.S. competitors. Says Eduardo de Martino, managing partner in France of H.R.C. Wyatt Co., a U.S. compensation specialist: ''By global standards, French bankers are way underpaid.'' In time a surge in stock options in France should change this picture radically. Options appeal to French conservatives and Socialists alike. Even though he admits to little interest in money himself, Le Floch-Prigent, the former chief of Rhone-Poulenc and a Socialist Party member, says: ''It is essential for the employees to profit from their company's good performance.'' Stock options are potentially more lucrative in France than in Britain and the U.S. Companies can effectively grant unlimited amounts of options to buy shares five years hence at a price 20% below today's. The gains are virtually tax-free. Among companies that have recently launched stock option plans are electronics manufacturer Matra, luxury-goods producer Moet Hennessy Louis Vuitton, and weapons maker Thomson-CSF. The scheme at Thomson covers more than 150 managers. They receive options to buy stock worth several times their salaries, or more than $1 million in shares for top executives. Says Pierre Roussel, Thomson's director of human resources: ''Since last year stock options have made compensation in France far more alluring.'' Compensation packages across Europe should keep growing -- and keep growing more alike -- as cross-border bidding for talented executives intensifies. The City of London is packed with Americans earning Wall Street salaries. Drug and cosmetic company Beecham Group came up with a mouthwatering deal in 1986 to lure Robert Bauman from the U.S. electronics maker Textron to become its chief executive. Bauman's annual earnings now top $1.2 million. This year Beecham raided U.S. competitor Sterling Drug to recruit James Andress as head of its worldwide pharmaceutical business. In a cross-border bank raid, Societe Generale de Belgique, the Belgian holding company recently acquired by French bank Cie Financiere de Suez, went to London for a new president. It recruited Herve de Carmoy from a top post at Midland Bank. Carmoy reportedly got a pay package worth some $1.3 million, stunning for a banker in Continental Europe. That put him ahead of Citicorp's John Reed, whose pay sagged in 1987 along with his bank's performance. Because Citicorp had a $1.1 billion loss for the year, Reed and other top executives got no bonuses at all. Reed earned $887,000. He also got $85,000 for exercising stock options. Before Carmoy gets too excited, though, he should take note of what else Citicorp gave Reed. During the year Reed was granted a total of 85,000 restricted shares of Citicorp stock. Based on recent stock prices, the shares have a value of about $2 million. Companies that do not match the world scale on compensation face two kinds of problems. If they are headquartered in historically low-paying countries and stick with local pay standards, their best managers may set sail for places like the U.S., where pay is higher. In addition, executives from these companies who work abroad may earn more than their superiors back home. The ! man who runs British Petroleum's American subsidiary, for example, makes $1 million a year, about 40% more than BP's chairman, Sir Peter Walters. THESE PROBLEMS have driven a handful of European companies to match compensation with competitors anywhere in the world. Hanson PLC, the British conglomerate with holdings ranging from chemicals and hot dogs to bricks and tobacco (see Dealmakers), is a prime example. With over half its sales in the U.S., Hanson is staffed with executives adept at managing on both sides of the Atlantic. Two years ago the company was on the verge of losing managers to higher-paying American competitors. Says vice chairman Martin Taylor: ''Our people in Britain were being approached. To keep them from being tempted away, we moved to a global pay scale.'' Hanson raised salaries sharply for more than a half dozen top executives. British Petroleum is gradually raising its meager pay scales to be more in line with the world oil industry. It is boosting salaries for top executives, has sweetened its stock option plan, and has substantially increased the maximum bonus. As these changes take hold, returning home isn't quite the sacrifice it used to be for European executives who have worked in America. In 1980 Pasquale Pistorio -- then the $170,000-a-year head of the international semiconductor division at Motorola in Phoenix -- returned to his native Italy, where he was moved down to a $135,000 salary to rescue state-owned semiconductor producer SGS. ''All I got was an armored car and a pay cut,'' says Pistorio. But when SGS and the semiconductor subsidiary of France's Thomson-CSF merged last year to form SGS-Thomson, Europe's second-largest chipmaker behind Philips, Pistorio got a raise. The owners, Thomson and the Italian government, decided that Pistorio should be paid closer to international standards. Last year his pay increased to more than $200,000, a figure that should grow if the company implements a bonus plan it has been considering. Pistorio deserves the money. Descended from a line of Sicilian farmers, he works from 8 A.M. to 9 P.M. and has taken one week's vacation in two years -- at a hotel in Sicily adjacent to one of his plants. ''In Europe,'' he says, ''we still don't have the same crazy spending for executives as in the U.S.'' Europe may never hit U.S. heights. But for the first time it is rewarding the mixture of vision and talent, guts and sweat that makes a great manager.