March 31st in Uncategorized by Editor .

Executive pay trends from the US point to frozen salaries

A Watson Wyatt survey conducted in March found that the number of US companies that froze salaries and added clawback policies to their executive pay programmes had jumped sharply during the past three months.

The proportion of respondents that had frozen salaries jumped to 55 per cent from 21 per cent in December. Approximately half (48 per cent) of respondents plan to decrease this year’s bonus pool by an average of about 40 per cent. Additionally, 23 per cent of …

 

A Watson Wyatt survey conducted in March found that the number of US companies that froze salaries and added clawback policies to their executive pay programmes had jumped sharply during the past three months.

The proportion of respondents that had frozen salaries jumped to 55 per cent from 21 per cent in December. Approximately half (48 per cent) of respondents plan to decrease this year’s bonus pool by an average of about 40 per cent. Additionally, 23 per cent of respondents had added a clawback policy.

“Pay trends in the US – especially at the executive level – often point the way for how things will develop in Europe, and in particular the UK,” said Sue Bartlett, a senior reward consultant at Watson Wyatt. “So far the recession has caused US companies to re-evaluate the long-term implications of their executive pay policies. Although boards are under pressure to make changes, it is still not clear whether the changes they have made have been aggressive enough to placate shareholders. These are exactly the same issues facing UK boards.”

A similar survey conducted by Watson Wyatt in January found that UK companies are taking a conservative approach to base salary increases. There was a significant difference in expected base salary increases between high and low performing companies, with 82 per cent of the low performers freezing executive salaries, but only 38 per cent of the high performers doing so. The UK survey also showed that a significant proportion of long-term incentive awards are going to lapse in 2009.