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December 15, 2008
Executive Bonuses Trimmed

Forty-nine percent of employers plan to reduce the size of their executive bonus pool compared with last year, according to a survey by Watson Wyatt, a consulting firm.

Of the companies that plan to reduce their bonus pool for executives, 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.

“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 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.

The survey included responses from 264 companies across a variety of industries.

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