Benefits March 9, 2009

Survey Finds Companies Adjusting Executive Pay Programs

March 9, 2009 (PLANSPONSOR.com) - A recent survey of U.S. companies finds that half are freezing executive base salaries in 2009.
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In a press release about its “Executive compensation: Rethinking strategies for challenging times” survey, Grant Thornton said another 15% of U.S. companies are implementing salary reduction programs. More than two-thirds of survey respondents (69%) are paying 2008 bonuses below targeted levels, with more than a quarter not awarding bonuses for 2008.

Companies report that 2009 bonus budgets will be the same or lower than 2008.

“Companies are expecting 2009 to be a challenging year for business growth and financial stability,” said Don Nemerov, a Compensation and Benefits executive director at Grant Thornton LLP, in the announcement. “As they recast business plans for leaner times, this is impacting executive compensation programs dramatically.”

The survey found only about one-fourth of companies have already implemented or are considering a special retention program. Grant Thornton says this is far below the number of companies that have implemented 2009 base salary freezes or reductions, raising a question as to whether companies that reduce or freeze salaries and do not at the same time focus on retention may risk losing some of their top talent.

Other survey results include:

  • Long-Term Incentive (LTI) Plans – For 2009, about half of all companies are reducing grant values and adjusting the number of underlying shares granted, reflecting the effort to balance competitiveness while conserving authorized plan shares.
  • Underwater Stock Options – More than half of public companies have more than 75% of their outstanding stock options underwater. More than half of these companies have implemented or are considering a re-pricing or exchange program to address their underwater options. (See Underwater Options Exchange Should Exclude Executives, Maintain Value )

The survey was conducted from January 26 to February 13, with 227 Grant Thornton U.S. clients participating. A full copy of the survey report can be downloaded from www.GrantThornton.com/cbc .

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