U.S. companies are cutting back on the annual bonuses and long-term incentives they pay their executives, according to a survey.
Watson Wyatt’s The Effect of the Economy on Executive Compensation Programs survey of 264 companies across a variety of industries found that 49% of companies plan to reduce the size of their executive bonus pool compared with last year.
Of these companies, 30% expect a cut of up to 20% , 35% expect a cut of 20%-to-50%, 23% expect a cut of 50% or more and 11% do not plan to pay any annual bonuses at all.
“Companies are going into 2009 expecting hard times,” says 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.”
The survey also found that 24% of respondent have frozen or expect to freeze executive salaries within the next year, while 39% have decreased or expect to decrease planned merit increases. Twenty-one percent have reduced or plan to reduce perquisites, and 14% have added or plan to add clawbacks.