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NEW YORK - As the American economy slowed to a crawl and stockholders watched their money evaporate, CEO pay still chugged to yet more dizzying heights last year, an Associated Press analysis shows.

The AP review of compensation for the heads of companies in the Standard & Poor's 500 index finds the median pay package added up to nearly $8.4 million. That's a comfortable gain of about $280,000 from 2006.

The 3 1/2 percent pay increase for CEOs came even as the landscape for both workers and shareholders darkened considerably and the economy was choked by a housing market in free fall, layoffs and soaring prices for fuel and food.

At the top of the AP list was John Thain, who took the reins of Merrill Lynch Dec. 1, 2007. His $83 million pay package was supercharged by a signing bonus and other enticements that lured him from the New York Stock Exchange to lead the investment bank as it was suffering its worst-ever losses.

Collectively, the 10 best-paid CEOs made more than half a billion dollars last year. Yet half the members of this stratospheric club were leading companies whose profits shrank dramatically.

The AP examination of CEO pay in 2007 mined data from the 410 companies in the S&P 500 that filed compensation disclosures with federal regulators in the first six months of this year.

The AP's formula, based on data from the past two years, adds up salary, perks, bonuses, above-market interest on pay set aside for later, and company estimates for the value of stock options and stock awards on the day they were granted last year.

That provides a clearer picture than pay totals required by the Securities and Exchange Commission, compensation experts say, because the SEC totals include expenses companies book during the year for previously granted stock compensation and retirement benefits.

The value of stock and options given to CEOs may turn out to be significantly higher or lower if they are ultimately cashed out, but the numbers in the AP formula do reflect the board of directors' estimate of the likely eventual payout.

The median salary figure of $8.4 million means half the CEOs in the AP analysis made more than that and half made less.

There were some signs companies were pulling back on pay at the top. Out of the 316 companies in the AP survey that had the same CEO two years running, about two-fifths lowered the total pay package for their CEOs. However, the primary culprit for some was falling stock prices that cut into the value of the shares included in pay packages.

In many more cases, overall pay ballooned.

Rick Wagoner, CEO of General Motors Corp., announced earlier this month the company had to close four plants that make trucks and SUVs because of lagging demand as fuel prices soar. That followed the posting of a $39 billion loss in 2007, a year when its stock price fell by about 19 percent, without adjusting for dividends.

And Wagoner? His pay rose 64 percent, to $15.7 million.

Last year was rocky for the economy and the stock market, making it a useful test of a concept called pay for performance - a term companies use to sell shareholders on the idea CEOs are being paid based on how well the company does.

According to this concept, trotted out frequently by the compensation committees of corporate boards in their proxy statements, a big chunk of CEO pay is considered ''at risk,'' meaning it could disappear if CEOs don't meet established metrics.

But the AP analysis found that CEO pay rose and fell regardless of the direction of a company's stock price or profits.

Take KB Home, battered by the subprime lending crisis and the weak housing market. According to the homebuilder's proxy statement, CEO Jeffrey Mezger is entitled to a cash bonus based on a percentage of KB's profit.

The problem was there was no profit. KB Home lost almost $930 million in 2007 and its stock lost 60 percent of its value. But Mezger still made $24.4 million, as valued by the AP, including a $6 million cash bonus.

He pocketed that bonus because he exceeded certain objectives the board had set out for him. Among them were improving performance on a customer satisfaction survey and developing senior leadership in his first year as CEO.

''Compensation has become a shell game,'' said Richard Ferlauto, director of pension and benefits policy for the American Federation of State, County and Municipal Employees, a Washington labor group representing government workers.

''So they take away the bonus, but then they still come up with ways to make sure the executive gets a big payout.''

Pay packages were somewhat smaller in the financial industry last year - banks, investment firms, mortgage companies, insurers and other institutions, all were roiled by the subprime lending disaster.

For companies in the financial sector that had the same CEO two years in a row, median pay dropped 4 1/4 percent, to $8.7 million in 2007. But that was still a smaller decline than the 6 percent drop in earnings and 15 percent slump in stock prices before dividend adjustments, according to Standard & Poor's Capital IQ data service.

''The cracks in the idea of pay for performance really start to show when performance falters but pay still rises,'' said Paul Hodgson, senior research associate at The Corporate Library, an independent corporate governance research firm. ''It's always a win-win scenario for executives.''

Even companies with huge profits and soaring stock prices can be faulted for not following the principle of pay for performance, according to some experts on corporate pay.

As an example, these experts cite the energy industry, where CEOs in the AP survey chalked up a median 32 percent gain in 2007.

It's no secret that profits at oil and gas companies have raced higher in recent years, and stock prices have followed. But that's not necessarily because CEOs are more skillful at operating their businesses. The rise has more to do with the surge in the price of oil, which this year has neared $140 a barrel.

Pay consultants say that illustrates a weakness in executive pay programs. When outside factors help the bottom line, CEOs tend to benefit personally, as well. But the opposite is not generally true, said Bill Coleman, chief compensation officer for, which provides corporate pay information.

''How convenient,'' he said. ''I take credit for everything good and I blame external factors for anything bad, but say that shouldn't affect my pay.''

Shareholders aren't in the boardroom when pay decisions are made, but at some companies they are gaining clout and holding directors more accountable.

In May, insurer Aflac Inc. became the first major U.S. company to give investors a vote on how senior management is paid, and shareholder proposals requesting an annual nonbinding vote on pay received slightly more support at U.S. companies this year.