(FORTUNE Magazine) – AMERICA'S top chief executives are sharply divided over some of the most basic principles of how they are paid. Is their compensation sufficiently linked to performance? About half say yes, half no. Do big annual bonuses orient them too much toward the short term? Again the split is almost exactly even. Whatever their views on these questions, most agree that the best way to improve the way CEOs are compensated is to tie pay more closely to the company's long-term performance. These findings come from the latest FORTUNE 500/CNN Moneyline CEO Poll, conducted from April 24 to May 3 by Clark Martire & Bartolomeo, an independent opinion research firm. Respondents were 214 CEOs of FORTUNE Industrial 500 and Service 500 companies. Previous polls have shown that corporate chiefs consider short-term orientation one of the greatest dangers facing U.S. business. While they disagree about the role of annual bonuses in perpetuating it, they believe that CEO pay procedures should be changed to address the problem. Many CEOs believe their financial rewards should be based on how well they manage their companies over three to five years. They favor tying more of their compensation to stock ownership plans, which bind their interests more closely to shareholders'. A few even advocate reducing the growth of base salaries as part of this shift. Stock options are already on the rise. A study by Towers Perrin, a major compensation consulting firm, found that options exercised by CEOs from 40 of America's largest corporations last year were almost as lucrative as salaries and bonuses combined. The average gain on exercised stock options among these chiefs was $916,936, compared with average salary and bonus totaling $1.2 million. Both forms of compensation increased substantially over 1987: Stock option gains rose 40%, while salaries and bonuses went up 14%. The increase in option gains may just reflect CEOs' views that the stock market's strong rise since 1982 hasn't long to run, so it's time to exercise options. Or it may embody a healthy trend toward making managers more like owners. Says Marion Sandler, chief of Golden West Financial: ''Most CEOs are hired guns. I think all this activity in leveraged buyouts demonstrated that they need a stake in the company.'' L. E. Coleman of Lubrizol, a specialty- chemicals firm, believes that executives should ''receive a little more compensation from incentives and a little less from base salary. Shareholders are more comfortable knowing that management is being paid to accomplish certain goals. And that means increasing shareholder value.'' Ronald Haddock of American Petrofina prescribes ''a substantial element of deferred compensation to be awarded as a function of earnings over five years.'' TAKING THE OPPOSITE view is Longview Fibre's Richard Wollenberg, a self- described iconoclast who advocates only a conservative base salary and rare year-end bonuses when the CEO has performed exceptionally well in good times or bad. Says Wollenberg: ''I'm against the incentives and exorbitant salaries that executives pay themselves. People forget their fiduciary responsibility. No matter how you pay CEOs, it costs the stockholders.'' It's worth noting that Wollenberg and his wife own 1.8% of Longview's shares, recently worth around $15 million. Richard Zimmerman of Hershey Foods also belongs to the minority who think compensation at the top has gone too far. He says, ''I have a private conviction that CEOs are paid too much.''

CEO pay, from whatever source, is far higher than ever and on average has been growing much faster than that of U.S. workers. Most CEOs defend their paychecks, sometimes citing the enormous fees earned by investment bankers and takeover attorneys. The theory goes that if these asset shufflers can make millions, certainly the chief of a major corporation -- who, for example, manages 100,000 people, serves a million shareholders, and contributes something tangible to the economy -- deserves to be paid accordingly. Russell Hanlin of Sunkist Growers adds another argument: ''A CEO has worked a lifetime before his or her compensation gets into the high figures. Some entertainers get a windfall with little preparation and a lot of hype. We have more impact on the economy, on jobs and good wages. Yet the public seems to have a deep resentment of business and public officials who often make less extraordinary amounts. There's a serious double standard.'' WHAT IS the fairest method of providing compensation? CEOs are the first to admit they are downright confused. Says Avram Goldberg of Stop & Shop: ''I am leery of experts who say they have the answers. I have spent some 30 years discussing incentives -- short-range, long-range, stock options, phantom options -- and the longer I look at this, the more I realize there are no simple answers.'' CEOs agree their pay should be based on several factors that include earnings per share, return on stockholders' equity, and how well they have weathered economic storms that were beyond their control. Beyond those generalizations, they resist formulas. Says Pfizer chief Edmund Pratt: ''I've been on compensation committees of other companies, and you shouldn't try to fit CEO compensation into too narrow a standard mold. That's faulty logic.'' Pratt also believes that ''the simpler the pay arrangements, the better. But we seem to be going in the opposite direction.'' Adds John Burns of Vista Chemical: ''Too much compensation is based on a survey of what the other guy is earning, rather than the company's rate of return.''

Wallace D. Malone Jr., head of SouthTrust Corp., offers a solution that makes sense to many of his peers: ''I would divide compensation into two parts, one based on short-term performance and the other based on long-term, with more weight given to the long-term -- no less than three years and no more than five years.'' Litton Industries' Orion Hoch advocates ''a balance between short-term and long-term performance that is particular to each company's needs, and flexible enough to change with time and circumstance.'' Avoiding formulas means relying on the discretion of the board's compensation committee, and with many CEOs that's just fine. A little over half of them serve on compensation committees of other companies. Says Halliburton's Thomas Cruikshank: ''Restricting damage in a down market may be tougher than making money in a market that's growing. There are times when Houdini himself couldn't change a bad environment, so members of the board's compensation committee should always be aware of the problems the CEO faced and how well he performed.'' Cruikshank concedes that committees aren't always so objective, but he sees that changing. Two-thirds of those polled said compensation consultants should be hired by the committee rather than by management. That arrangement, which avoids making the consultant recommend a compensation package for the man who's paying his bill, is rare today. Shareholders are increasingly asking boards to justify executive pay. ITT's Rand Araskog says, ''A compensation committee should consist of at least four people and should include active, not retired, CEOs of other companies. No one on the committee should be a personal friend or a longtime business associate of the CEO prior to becoming a member of the committee.'' For all their differing opinions on compensation, not one CEO interviewed for this survey complained he was paid too little, though some were proud to point out that their salaries are below those of direct competitors. In general, CEOs are satisfied with their pay. Few ever switch jobs because they are offered more money. But if so many of them agree changes are in order, and are willing to link more of their pay to riskier long-term plans, shareholders may just want to take them up on the offer.

BOX: Q In general, is CEO pay linked to performance as much as it should be?

A Yes 51% No 48% Not sure 1%

Q Do sizable annual bonuses orient a CEO too much toward the short term?

A Yes 48% No 47% Not sure 5%

Q If a compensation consultant helps set CEO pay, should he be hired by the compensation committee or by the company?

A Committee 66% Company 17% Both 3% No difference 9% Not sure 5%

Q Do you serve on the compensation committee of another company's board?

A Yes 56% No 44%

Q What are the best ways to improve CEO compensation?

A Tie a greater portion of compensation to long-term performance 31% Increase stock options 17% Balance short and long-term performance 15% Award ''balloon payment'' bonuses at the end of three to five years if goals are achieved 7%

Other responses include: Vary salary and bonus according to annual performance, leave annual pay to compensation committee's discretion, make no changes.