Recession Forcing Companies to Cut Executive Bonuses, Watson Wyatt Survey Finds
December 11 2008 - 2:12PM
PR Newswire (US)
Companies Also Decreasing Long-Term Incentives, Freezing Salaries
and Reducing Perquisites WASHINGTON, Dec. 11 /PRNewswire-FirstCall/
-- With the recession showing no end in sight and the current
spotlight on executive pay, many U.S. companies are cutting back on
the annual bonuses and long-term incentives they pay their
executives, according to a survey by Watson Wyatt, a leading global
consulting firm. Watson Wyatt's survey, "The Effect of the Economy
on Executive Compensation Programs," found that one in two
companies (49 percent) plan to reduce the size of their executive
bonus pool compared with last year. Of these companies, 30 percent
expect a cut of up to 20 percent, 35 percent expect a cut of
20-to-50 percent, 23 percent expect a cut of 50 percent or more and
11 percent do not plan to pay any annual bonuses at all. Watson
Wyatt's survey, conducted in December 2008, includes responses from
264 companies across a variety of industries. "Companies are going
into 2009 expecting hard times," said Ira Kay, global director of
executive compensation consulting at Watson Wyatt. "Given the
enormous pressure to respond to shareholders, who have been hit
hard by the economic crisis, it's no surprise that all aspects of
executive pay programs are being scrutinized." Included in that
review are long-term incentives. Almost one in four companies (23
percent) expect the dollar value of their long-term incentive
grants to decrease in the next year, most likely as a consequence
of the recent fall in the equities market. In terms of other
long-term compensation vehicles, companies are putting less
emphasis on stock options and relying more on performance-based
restricted stock in the coming year. The Recession Is Leading
Companies to Reduce Executives' Pay Packages Action Already made
Expect to change make change in 12 months Decrease planned merit
increases 30% 9% Freeze salaries 21% 3% Delay planned merit
increases 13% 3% Reduce salaries 2% 0% Reduce/eliminate SERPs 8% 1%
Reduce/eliminate perquisites 17% 4% Add clawback program 13% 1% The
survey also found that nearly one in four companies (24 percent)
has frozen or expects to freeze executive salaries within the next
year, and four in 10 (39 percent) have decreased or expect to
decrease planned merit increases. More than one in five companies
(21 percent) has reduced or plans to reduce perquisites, while 14
percent have added or plan to add clawbacks. "It's a challenge to
provide meaningful incentive opportunities in the current
environment," said Andrew Goldstein, North American co-leader of
executive compensation consulting at Watson Wyatt. "Companies face
a difficult balancing act -- reducing pay programs in response to a
very challenging economy, while continuing to retain and motivate
key executives." Other survey findings include: -- One in 10
companies (9 percent) has added, or expects to add, a special
retention bonus. An additional 21 percent are considering doing so.
-- Twenty-nine percent of companies expect to change the
performance metrics of their annual bonus plan. -- Companies are
expecting a 2009 merit increase pool of 3 percent - a drop of 25
percent from last year. For more information, visit
http://www.watsonwyatt.com/ExecCompReport. About Watson Wyatt
Watson Wyatt (NYSE:WWNASDAQ:WW) is the trusted business partner to
the world's leading organizations on people and financial issues.
The firm's global services include: managing the cost and
effectiveness of employee benefit programs; developing attraction,
retention and reward strategies; advising pension plan sponsors and
other institutions on optimal investment strategies; providing
strategic and financial advice to insurance and financial services
companies; and delivering related technology, outsourcing and data
services. Watson Wyatt has 7,600 associates in 32 countries and is
located on the Web at http://www.watsonwyatt.com/. DATASOURCE:
Watson Wyatt CONTACT: Ed Emerman for Watson Wyatt, +1-609-275-5162,
; or Steve Arnoff of Watson Wyatt, +1-703-258-7634, Web site:
http://www.watsonwyatt.com/
http://www.watsonwyatt.com/ExecCompReport
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