One sure sign of an economic slowdown is the decision by executives, particularly CEOs, to take a pay cut. There are several reasons why an executive would take this step, including outside pressure from shareholders and politicians, a rapid need to conserve cash (particularly at smaller companies), or a decision by executives to share some of the pain with rank-and-file employees when broader pay cuts and workforce reductions are announced.
From our vantage point as an executive pay tracker, it is now clear that a major trend is developing in this area. The rate at which companies are reducing executive salaries is accelerating. And, in many cases, executives are taking the lead by voluntarily asking for a pay cut.
In the last week alone, we’ve seen pay reductions at FedEx, where CEO pay was cut by 20%, Motorola, where pay was lowered by 25% for both co-CEOs, and Western Digital, where the CEO took a 33% slice in pay. These actions follow similar moves at scores of other companies in the last few months. Not counted here are companies like Morgan Stanley and Goldman Sachs where executives have forgone bonuses. That trend is yet another, better documented, product of these troubled times.
In addition to CEOs taking smaller salaries and bonuses, some non-employee directors are following suit. For example, at Thor Industries, directors reduced their annual retainers by 15%, citing declining profits in 2008.
Of course, the real question to consider is what does this mean? For those with a glass-half-empty approach, these cases are simply examples of desperate times calling for desperate measures. For those with a more upbeat outlook, these events are a sign that companies are striving to build an ever-stronger connection between pay and performance. Most likely, we are seeing both forces at play. It will be interesting to see how this trend plays out in the new year as we enter proxy season.
My Poor(er) Mets!
Wow, what a couple of weeks for my hometown Mets. One minute, we’re high-fiving the signings of K-Rod and J.J. Putz and the next it’s Madoff fleecing our poor Wilpons. Fortunately, it looks like the Mets will survive the terrible news that they, like so many others, were victims of what might be the largest fraud in history. Hopefully, this is behind them and Omar can wrap things up with a corner outfielder and a fourth starter.
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For many of us, we are at the start of what will likely be the most painful recession of our lifetime. Everything you read or hear these days starts with "worst since the Depression." Traditionally, we send chocolates to our clients as a small token of our appreciation and also have a holiday party at a local restaurant to celebrate the close of a great year. Fortunately for us at Equilar, we’ve experienced another year of double-digit growth and are looking forward to expanding on our success. But given the challenges that many others are facing during the current recession, the management team decided to let our employees vote on whether to (i) send out chocolates like we’ve done in the past and have our annual holiday party, or (ii) take these funds and give them to those in need.
I am proud to report that an overwhelming majority of our employees voted in favor of helping those who certainly can benefit from it. This says a lot about the integrity and generosity of those at Equilar. In a year when many companies are cutting back on their charitable giving, we are proud to be bucking the trend and taking our success and making a difference, not only in our local community but throughout the world.
I’ve listed below five charities that we will be supporting this year:
- We’ve volunteered at the Second Harvest Food Bank of Santa Clara and San Mateo Counties twice a year as a company for the past several years, by helping with the sorting of food donations. Sorting through several tons of food is a great team-building exercise and also a way for us to help serve in the community. In addition to going again on December 19th, we’re proud to be making a donation of $2,500 to Second Harvest Food Bank.
- Sports4Kids is a great organization that combines two areas that we take seriously at Equilar — education and athletics. Think of Teach for America but for the playgrounds. We’re excited to be donating $2,500 to help kids in low-income school districts across the U.S.
- The Sakhi Foundation is Equilar Senior Account Manager Farkhanda Zhublawar’s family’s charity, and is helping with the rebuilding of Afghanistan. Our $1,000 contribution will go towards the construction of a new school that the Foundation is building in Mazar-e-Sharif, Afghanistan.
- The DRC Sannam Forum is a family foundation that my dad set up several years ago to provide scholarships to underprivileged students in rural Korea. (As an aside, my dad is your classic immigrant success story.) Equilar’s $1,000 donation is a small way for us to give back to students from his childhood neighborhood. Let’s just say if it wasn’t for my father, Equilar wouldn’t be where it is today.
- We are also proud to announce the launch of the Equilar Scholars Program. Through the assistance of the Asian Pacific Fund, we’ll be providing two $1,000 scholarships (renewable each year) to students at UC Berkeley in 2009. We’ve had great success with Berkeley graduates and are excited to be expanding our presence on the UC Berkeley campus. 2009 will be the start of the Equilar Scholars Program and we look forward to increasing our giving to Berkeley students.
Thank you to everyone for your continued support. We’re proud to take our success and share it with those in need. Happy holidays, and we look forward to continued success in the upcoming year.
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