LONDON -- Peter Giller took a gamble with his chief-executive compensation to try to change Britain's International Power PLC's corporate culture. So far, he is down hundreds of thousands of pounds.

When Mr. Giller was named CEO two years ago, he took a job without a company car, without insurance and without a salary. Instead, the 60-year-old German engineer asked to be paid entirely in the new company's stock, apart from £1,100 ($1,608 or €1,702) a week for living expenses. Over three years as CEO, he would get a total of 677,564 shares in three annual installments, then valued at £2 million. If the share price rose substantially on his watch, he not only would profit on those shares, would also get more -- additional stock valued at least £5 million if bonus conditions, including the doubling of the stock price, are met.

But the global slowdown and Sept. 11 knocked the legs out of the stock rally that Mr. Giller was counting on. International Power, created from the breakup of Britain's National Power PLC and owner of power plants in the U.S., the U.K., continental Europe, Asia and the Middle East, trades at about 185.75 pence a share, down from 311.75 pence when it started trading Oct. 2, 2000. Mr. Giller's base compensation package would now be valued at £1.26 million.

"My wife said to me this morning, 'If you take another job, take one with a salary,' " says Mr. Giller, who previously was president of ABB Energy Ventures of Princeton, New Jersey, a unit of ABB Ltd. of Zurich.

Mr. Giller says he sought the stock deal -- rather than the job's £500,000 annual salary -- to instill an entrepreneurial spirit at a company that once was part of a government-owned utility. He shook things up further by rearranging the London headquarters, creating an "open office" where people sit side by side at long tables. He also demolished the legendary chairman's suite and turned it into a coffee bar for staff, with the formerly private terrace overlooking the Thames as an outdoor common area for company barbecues.

"I want people to take ownership of the company," Mr. Giller says. "You have to lead by example. ... If you are going for the upside, you have to accept the downside too." His example is followed, if more cautiously, by the 85% of the staff that participates in the company's stock-purchase savings plan.

Exceeding the Standard

While linking executive pay to share performance has grown more common in the U.K. and elsewhere in Europe, such awards of stock and stock options still account for just 45% of top executives' pay in the U.K., compared with 61% in the U.S., says Belinda Hudson, European partner at Mercer Human Resource Consulting in London. Base salary is 39% of pay in the U.K., compared with 18% in the U.S. Of course, Mr. Giller's package is extreme even by American standards.

Ms. Hudson says she doesn't think anyone expected the deal to set a precedent in the industry: "Not all executives can afford to give up having any cash. ... The vast majority of CEOs need some income."

Indeed, after receiving the first installment of stock last October, Mr. Giller sold 70% of it, pocketing £335,563. He bristles at the suggestion that the sale shows a lack of faith in the company. "What CEO in this town is using 30% of his salary [to invest] in the company's stock?" he asks.

Not that he recommends so much exposure for all his peers. "I am not saying that other CEOs should do the same," Mr. Giller says. "If I were 10 years younger I would probably look for more stability. It is easy when you are an empty nester." Mr. Giller lives with his wife in an apartment near London's Tower Bridge; their two children are grown and gone.

"I don't have an expensive lifestyle," he says. ... "I could go back to Princeton, New Jersey, and live on $85,000 (€90,092) a year."

Despite the potential for a huge payout, Mr. Giller has been praised by the London media as part of a new breed of "thin cats" willing to share investors' pain.

"There are a number of times when you think: Would management really do that if they owned a 20% or 30% stake in the company?" says Andrew Wright, a U.K. utilities analyst at UBS Warburg. "And the answer is: They probably would not."

Powerful Problems

But while he may admire Mr. Giller's approach to compensation, Mr. Wright doesn't think the CEO's bet on the company's shares will be rewarded soon. In 2000, power shortages in California and record wholesale prices in several parts of the U.S. made International Power's U.S. focus look smart, but the construction of new power plants has resulted in possible overcapacity, he says, especially in parts of Texas -- where the company has bulked up.

Mr. Giller, however, says he believes International Power's stock is undervalued. In recent months, he and other senior executives have traveled to the U.S. and several other countries to make that case to shareholders and potential investors.