Sponsored by Forest Grove Economic Development
Home Back Issues October 2008 Should executives share the pain of pay cuts?

Should executives share the pain of pay cuts?

| Print |  Email
Archives - October 2008
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

Risks & rewards of owning triple net investments

Contributed Blogs
Thursday, July 24, 2014
NNNinvestmentBY CLIFF HOCKLEY | OB GUEST CONTRIBUTOR

With the increasing retirements of Baby Boomers, a massive real estate shift has created a significant increase in demand for NNN properties. The result? Increased demand has triggered higher prices and lower yields.


Read more...

The global challenge

News
Friday, June 27, 2014
062714 thumb globalmarketBY JASON NORRIS | OB BLOGGER

Over the last several months we have seen a wave of cross-border acquisitions, primarily U.S.-based companies looking to purchase non-U.S.-based companies. There are a few reasons for this, but the main culprit is the U.S. corporate tax system. The United States has one of the highest corporate tax rates in the world.


Read more...

Trends in business succession

News
Thursday, July 03, 2014
TrendsBY TED AUSTIN & MIKE BAELE | GUEST CONTRIBUTORS

The Office of Economic Analysis announced that Oregon is currently enjoying the strongest job growth since 2006. While this resurgence has been welcome, the lingering effects of the 2008 “Great Recession” continues to affect Oregon businesses, especially with regard to estate planning and business succession.


Read more...

Q&A: David Lively of Organically Grown Co.

News
Tuesday, July 01, 2014
OGCLogoBY HANNAH WALLACE | OB BLOGGER

Demand for organic food continues to soar: Last year, sales of organic food rose to $32.3 billion — up 10% from 2012. In Oregon, organic produce wholesaler Organically Grown Co. has been championing organic growing methods for four decades.


Read more...

The business of running a food cart

News
Thursday, June 05, 2014
OBM1BY HANNAH WALLACE | OB BLOGGER

What does it take to launch and run one of these mobile food businesses?  


Read more...

OB Video: Oregon MESA

News
Thursday, June 26, 2014

ThumbOregon Business hosts an informal roundtable discussion about the Oregon MESA (Mathematics, Engineering, Science Achievement) program.


Read more...

The Scott Kveton affair

News
Wednesday, July 09, 2014
ScottKvetonBY LINDA BAKER | OB EDITOR

Scott Kveton, the CEO of Urban Airship is taking a leave of absence from the company. As the story continues to unfold, here’s our perspective on a few of the key players.


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