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| Friday, November 20, 2009 |
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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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March 2, 2009 4:10 PM ET
In a dramatic shift since last fall, companies are moving more aggressively to freeze executive salaries and substantially reduce bonuses and stock-based awards. According to a survey of 400 managers by compensation consultancy Pearl Meyer & Partners, half said their companies have implemented or are “strongly considering” imposing an executive salary freeze—nearly three times as many as in a similar survey in November. Among those expecting to give raises, fewer than 6% expect to boost salaries more than 5%. The results reveal growing recognition that market turmoil, the potential for government intervention, and the public’s heightened sensitivity to executive pay will significantly affect compensation plans. Indeed, 90% of respondents to the survey said the troubled economy will impact their compensation decisions over the next six months. And even non-financial companies are considering executive pay restrictions like those imposed by Treasury on companies that have taken federal rescue funds, the survey found. “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, in a press release. Swinford said that while bonuses normally decline when performance targets are missed, more companies are planning to cut incentive payouts more deeply than called for by the performance plan formula. About a quarter of respondents expect to pay no yearend bonuses for 2008, while 42% are considering paying less than what the executive “earned” based on the plan’s performance objectives. Boards also are less willing to cushion executives from plummeting market prices. Nearly 60% of respondents anticipate a reduction in 2009 long-term incentive awards—the stock option and restricted stock grants that comprise the bulk of executive compensation in many industries. Of those, half predict values will be “considerably lower.” “Boards are rejecting the argument that larger grants are needed in 2009 to replace the retention ‘glue’ provided by past stock awards that have lost enormous value in the market downturn,” Swinford said.
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