Cuts extended to bonuses and long-term incentive grants in U.S.

Survey finds salary freezes, clawback policies on the rise
||Last Updated: 04/20/2009

The number of companies in the United States that froze salaries and added clawback policies to executive pay programs has jumped sharply during the past three months, according to a survey by consulting firm Watson Wyatt. The survey also found many companies plan to slash funding for annual bonuses and reduce the value of long-term incentive (LTI) awards.
“The recession has shone a light on executive pay, causing many companies to re-evaluate the long-term implications of their executive pay policies,” said Andrew Goldstein, North American co-leader of executive compensation consulting at Watson Wyatt. "Although boards are under pressure to make changes, it's still not clear whether the changes they have made have been aggressive enough to placate shareholders.”
According to the survey, the percentage of respondents that have frozen salaries has jumped to 55 percent from 21 percent in December. About one-half (48 per cent) plan to decrease this year's bonus pool by about 40 per cent. Additionally, 23 per cent have added a clawback policy. One-third (33 percent) of respondents also expect that the LTI grant dollar values will fall, with an average decline of 35 per cent.
The Watson Wyatt survey was conducted during the first week of March and included responses from HR and compensation executives at 145 companies.