Instructions say to report he Wages reported to "you" , it is including "all" wages paid to staff on the K-1 of each shareholder, not just their own wages.

I think you may be confusing the "shareholder" instructions for Schedule K-1 with the instructions for preparing the 1120S. See page 39 of the instructions for the 1120S

Thank you for this clarification, yes I was looking at the instructions for the shareholder.  This makes my day!