Executive Recession Pain
As record losses and layoffs mount, many companies are asking their executives to share some of the pain. Of course, foregoing a multimillion dollar bonus isn't as much of a hardship as losing your job, your home or your health coverage when sick. But still, it's something.
Bank of America was the latest bank to announce that the CEO and senior executives would not be getting a bonus this year. That's good, especially since they would be using our money to pay out the bonuses because they posted a loss and partook of TARP. CEO Kenneth Lewis was simply following the footsteps of other financial institutions like Citi who had announced earlier that top executives would give up their bonuses. According to reports, this leaves Lewis with only $24M in compensation for 2008, 11% less than 2007.
Other industries who haven't been part of the bailout crew are also reacting to the toxic economic climate by announcing large job cuts. In the tech industry, major companies have announced layoffs along with pay cuts for the executive staff.
EMC announced a major restructuring which would reduce the number of employees by 2400 despite increased revenues for Q4, and at the same time they've reported that their senior leadership will be taking a pay cut.
Lenovo, the Chinese company that took over IBM's PC business, announced that they plan to cut 11% of their worldwide staff and that executive compensation would also be reduced by 30-50 percent.
And according to the San Jose Mercury, Motorola and Western Digital also announced pay cuts for their executives.
If you want to reflect on the difference in the economic waters between now and a few years ago, it used to be that when companies announced layoffs, the senior management was rewarded for firing workers. At least today, the stock market isn't regarding news of layoffs as the sign of brilliant management decisions and phenomenal wealth creation.