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SAN FRANCISCO — E-Trade Group Inc. Chairman Christos Cotsakos agreed Friday to relinquish his salary for the next two years and surrender other rich benefits in an effort to quell outrage over a compensation package that made him the brokerage industry’s top-paid executive. 

Cotsakos, E-Trade’s chief executive since 1996, agreed to a more modest contract 10 days after the Menlo Park-based company disclosed that it gave him a 2001 pay package valued at about $80 million. 

E-Trade rewarded Cotsakos against the backdrop of a painful stock market downturn that has battered much of the brokerage industry. Cotsakos has helped insulate E-Trade from the fallout by expanding the online brokerage into banking and other financial services. 

E-Trade still lost $241 million last year and another $276 million during the first three months of this year, a setback the company blamed on special accounting charges. 

E-Trade said it made an operating profit throughout last year, a performance that it credited largely to Cotsakos’ leadership. The company’s 2001 revenue totaled $1.28 billion, up from $73 million annually when Cotsakos first arrived. 

Other brokers trimmed their executives’ paychecks during last year’s market turbulence. 

Last year, Charles Schwab Corp. — the largest online stock brokerage — suspended the bonuses of its co-CEOs, Charles Schwab and David Pottruck. The two men each received $8.1 million bonuses in the prior year. Goldman Sachs and Merrill Lynch also reduced the pay of their CEOs last year. 

Shareholders still aren’t convinced Cotsakos ranks as the most valuable executive in the brokerage industry. 

Investors expressed their frustration with E-Trade by punishing the company’s stock. The company’s shares dropped by 28 percent in the first few days after E-Trade disclosed Cotsakos’ pay package. 

The stock regained some ground earlier this week, but remains below its price before the indignation over Cotsakos’ contract. E-Trade’s shares fell 17 cents to $5.95 Friday on the New York Stock Exchange. E-Trade’s shares peaked at a split-adjusted $36 a little over three years ago. 

“There were some very egregious parts of the arrangement (with Cotsakos) that obviously had to be addressed,” said Judith Fischer, managing director of Executive Compensation Advisory Services, a compensation consultant in Alexandria, Va. 

“But E-Trade should have figured that out before they went public with the details last week.” 

Cotsakos, 53, will face shareholders May 24 at E-Trade’s annual meeting. 

“I have listened to shareowner concerns and want to dispel any doubt that my commitment to the success of this company is unwavering,” Cotsakos said. “I am eager to eliminate the distraction of the compensation discussion so that we can focus on the business.” 

Under his new contract expiring in May 2004, Cotsakos will forgo his salary for the next two years and will receive a bonus “based exclusively on the company’s performance,” E-Trade said. Last year, E-Trade paid Cotsakos a $798,000 salary and a $4.1 million bonus. 

Several other features of last year’s pay package enraged shareholders. 

E-Trade forgave a $15 million loan to Cotsakos, gave him $17.9 million to cover income taxes, contributed $9.9 million to his retirement plan and doled out 4.67 million shares of restricted stock valued at $29.3 million. 

Cotsakos also received stock options with an estimated value ranging between $2.2 million and $5.6 million. 

The new contract requires Cotsakos to return $6 million of his retirement contributions and give back 2 million shares of the restricted stock. 

E-Trade also will pay Cotsakos dramatically less if he loses his job in a takeover. Under the old contract, Cotsakos could have received a $125 million severance package. The new agreement caps his severance pay at $4 million, according to a copy of the contract filed with the Securities and Exchange Commission. 

Cotsakos is widely credited for establishing E-Trade as a well-known brand in a short time.