Grant Thornton has a relatively recent (February 2009) survey on its website regarding executive compensation that reports 50% of companies surveyed are freezing executive base salaries for 2009 and 15% are reducing salaries. 227 companies responded to the survey, of which the “typical” company seems to be publicly traded with revenues below $100 million and 100-499 employees.
The numbers highlight a motivation problem for companies and their employees, namely how to structure a compensation program when bonuses, salaries, and stock prices are down. Companies that lower bonus targets, re-price options, and start “special retention programs” risk investor criticism for rewarding the executives who contributed to the company’s decline. Conversely, investors who recognize that a decline is not necessarily the result of poor executive performance often want to continue to motivate key employees.
