Economic Turmoil Likely to Take Toll on Executive Comp Programs

The Baltimore Business Journal reported nearly nine out of 10 corporate officials polled said the market turmoil will hurt corporate executive compensation over the next six months, according to the poll by New York compensation consultant Pearl Meyer & Partners.

More than half of respondents indicated there would likely be a drop in stock options and restricted share grants that comprise much of executive compensation. Twenty percent expect to revise their companies’ severance packages or change-in-control arrangements over the next year because of the nation’s economic crisis, the Business Journal said.

In addition to declines in performance-based pay, respondents also indicated they expect salary growth to be lower next year, and nearly 18% were “strongly considering” a salary freeze.

“It’s appropriate that variable components of pay such as annual bonus awards and stock grants are being put at risk in executive pay programs – that is how pay for performance is supposed to work,” said David Swinford, president and chief executive officer of Pearl Meyer & Partners, in the news report. “The open question is whether the reductions will be in line with the expectations of shareholders who are feeling the pain in their own portfolios.”

The consultant surveyed 410 board members, executives, and human resources professionals earlier this month for its “Executive Pay in the New Economy” online survey.