Executives Getting Paid Less
As the economic crisis deepens, more companies are cutting back on wages, annual bonuses and stock options for top-level employees, a recent survey found.
Of more than 400 company board members, executives and human resource managers polled, nearly nine out of 10 said market turmoil will affect their top-level compensation packages over the next six months, according to Pearl Meyer & Partners, a New York-based consulting firm.
In addition to reduced performance-based pay, about 50 percent of respondents said they expected salary growth to drop in 2009, while 18 percent said their company is strongly considering a salary freeze.
"It's appropriate that variable components of pay such as annual bonus awards and stock grants are being put at risk in executive pay programs -- that is how pay for performance is supposed to work," David Swinford, CEO of the New York-based consulting firm, said in a statement. "The open question is whether the reductions will be in line with the expectations of shareholders who are feeling the pain in their own portfolios," he said.
Most employers are anticipating declines in the value of long-term incentive awards, such as the stock options that comprise the bulk of executive compensation in many industries, the survey found.
"When companies decide not to increase the size of stock awards to compensate for depressed share values, it means executives do not benefit unless -- and until -- they succeed in boosting the share price," Swinford said.