Companies are moving more aggressively to freeze executive salaries and to significantly reduce bonuses and stock-based awards, according to a survey completed last week by compensation consultancy Pearl Meyer & Partners.
The latest results from the Executive Pay in the New Economy online survey series reveal growing recognition that market turmoil, the potential for government intervention, and the public’s heightened sensitivity to executive pay will significantly affect programs going forward. The 436 board members, executives and human resources professionals who participated in the survey expressed a more negative outlook for executive pay than respondents to a similar survey conducted by the firm last November.
“It is difficult for companies to justify executive salary increases when growing numbers of employees face layoffs and more firms are struggling just to survive,” said David N. Swinford, president and CEO of Pearl Meyer & Partners. Companies are also eyeing executive pay restrictions imposed by Treasury on companies that have taken federal TARP funds.
“The survey shows that increasingly, Boards and management are moving to reexamine executive pay design even in industries not directly affected by these restrictions,” said Swinford.
Fully 90% of survey respondents in February said the troubled economy will color their compensation decisions over the next six months. “That suggests that in contrast with the sustained economic and executive pay growth of the previous decade, many Boards realize they will have to better manage executives’ expectations about their likely career earnings,” Swinford said.
Top trends that surfaced from the survey include:
- Bonus payouts below formula
- Base salary freezes common
- Stock award values drop