Changing "comp" To Cope With The Crunch

American business found little to celebrate when the books were closed on 1980. Battered by record-high inflation and interest rates, most companies were satisfied to hit the break-even point.

How did last year's sluggish business climate affect executive compensation? Seventy-six percent of the respondents to the INC. survey indicated that they made no pay changes that could be directly related to business conditions. However, among those who did react to the economic slump by modifying top management's compensation, the strategies amounted to bad news in the payroll department.

As one executive noted, it was a "hold-tight" year. Indicative of the severe credit crunch that most smaller enterprises encountered, another respondent reported that top management's cash bonuses were being lent back to the company. Typical of other comments received are these:

* "Waived bonuses due to 1980 financial performance; postponed top executive salary increases indefinitely."

* "Froze salaries at current levels due to projected decrease in profits."

* "Chairman's salary waived for up to four months; president's pay cut by 30% for an indefinite period; no raises for two other executives."

Pay cuts were the most common consequence of last year's lag in business. Of 219 respondents who indicated changes in pay policies due to economic conditions, 15% trimmed salaries, 12% reduced raises, 10% eliminated salary hikes altogether, 9% waived bonuses, and another 5% cut bonuses.

On an upbeat note, it appears that such tactics will be unnecessary in 1981. Overall, four out of five respondents to the INC. survey are counting on business growth this year. Only 14% expect sales or revenues to remain at the same level as last year, and still fewer -- 5% -- predict a decline in volume.

How optimistic is small business about 1981? Twenty-nine percent of the survey participants anticipate that sales will soar by 30% or more, and another 10% are counting on gains of between 21% and 29%. Overall, three out of four smaller businesses are betting on real growth in 1981. If the forecasts hold true, executives can count on one other thing -- last year's battered paychecks will become fatter paychecks this year.

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