Should executives share the pain of pay cuts?

| Print |  Email
Wednesday, October 01, 2008

If corporate ethicist David Layzell had his way, all public companies would institute performance-based executive pay programs like Monaco Coach recently did.

In response to lagging sales, the Coburg-based luxury RV maker announced this summer they were laying off workers and shuttering manufacturing operations in Indiana. The company also decided to reduce the pay of its top executives.

The program cuts the pay of top managers by 15% to 50%, though portions of their compensation can be earned back if they reduce company inventory by $58 million over the next 12 months, according to Securities and Exchange Commission filings.

As the economy slows, top-level executive pay is bound to be an issue with investors as overall business suffers. Layzell, associate director at the Portland State University Center for Professional Integrity and Accountability, says reducing executive pay when times are bad is what any “reasonable company” should do.

But premium executive talent can be tough to find and to keep. A company must also consider the consequences of a skilled and experienced executive leaving for a more desirable job if they take a pay cut. A company must ask, “Can we consciously pay below market value,” Layzell says. After all, “If you pay below market value, you get below market quality,” he says.

Aside from finances, a favorable company image is also at stake. By reconsidering the compensation of a struggling company’s top decision-makers, it addresses the question of “sharing the pain,” says Layzell.

Monaco CEO Kay Toolson’s pay was slashed by 50% and president John Nepute’s compensation was cut by 30%. This should save the company about a million dollars over the year, says Craig Wanichek, Monaco’s director of investor relations.

“It’s about tying the objective of the company with the management team,” Wanichek says. Executive pay-reduction initiatives are relatively new in corporate governance. Layzell, who also held a number of senior finance roles at Intel for 26 years, says such programs were born from the excesses of the 1990s. In recent years, exorbitant executive compensation has encountered a firestorm of scrutiny as investors and employees demand management be held accountable, not rewarded, for a failing company.

Saving money by reducing your own pay, though, is just a small part of it. It’s also a statement of solidarity, says Layzell. When employees see that their bosses are willing to cut their own pay, it boosts workplace morale.                     

JASON SHUFFLER


Have an opinion? E-mail This e-mail address is being protected from spambots. You need JavaScript enabled to view it


 

More Articles

Undersea Power

June 2015
Friday, May 22, 2015
BY JACOB PALMER

Mike Morrow and Mike Delos-Reyes first came up with the idea of an ocean power device 23 years ago, when they were students at Oregon State University. They realized a long-held vision last summer, when their startup, M3 Wave, successfully launched the first ocean power device that works underwater.


Read more...

6 things to know about the Amtrak Cascades route

The Latest
Friday, May 22, 2015
thumb3BY JACOB PALMER | DIGITAL NEWS EDITOR

The recent tragedy in Philadelphia has called attention to Amtrak and the nation's woefully underfunded rail service. Here are six facts about the Amtrak Cascades corridor between Eugene and Vancouver B.C. 


Read more...

The ancient fish that stops bullets

The Latest
Friday, May 08, 2015
hagfishthumbBY CHRIS NOBLE | PHOTOS BY JASON E. KAPLAN

Hagfish may not have evolved much over the last 300 million years, but their protein-heavy slime promises advances in super-materials.


Read more...

Biker dreams

The Latest
Friday, May 15, 2015
bike at ater wynn-thumbBY KIM MOORE | RESEARCH EDITOR

The Portland Bureau of Transportation is seeking input from businesses on a $5.5 million initiative to create a network of biking, transit and pedestrian trails within Portland’s central city.


Read more...

Eco Zoned

June 2015
Friday, May 22, 2015
BY HANNAH WALLACE

Travelers have always come to Oregon for its natural beauty. But will the increasing popularity of agritourism, European-style hiking getaways and forest resorts relax Oregon's notoriously strict land-use laws?


Read more...

Fixing Oregon’s broken roads

The Latest
Tuesday, June 09, 2015
RUCCostComparison rev4-30BY KIM MOORE | RESEARCH EDITOR

The technology at the center of Oregon’s road usage fee reform.


Read more...

Up in the Air

June 2015
Friday, May 22, 2015
BY ANNIE ELLISON

Portland tech veteran Ben Berry is leaving his post as Portland’s chief technology officer for a full-time role producing unmanned aerial vehicles (UAVs) aimed at first responders and the military. Berry’s AirShip Technologies Group is poised to be on the ground floor of an industry that will supply drones to as many as 100,000 police, fire and emergency agencies nationwide. He reveals the plan for takeoff.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS