I don't know how much money it will save, but at least Caterpillar Inc. is making a move that might improve employee morale by announcing it will cut executive compensation by up to 50% next year, according to an Associated Press story.
The mining and construction equipment maker has already laid off employees, and plans temporary factory shutdowns and more layoffs as needed. As someone who was laid off, (not by Caterpillar but at a newspaper) I think cutting executive pay sends a message that everyone is feeling the pain and that executives who make as much money in a month as a floor workers does in a year are not immune from the recession.
Pay for senior managers at Caterpillar, based in Peoria, Ill., will also be reduced next year by 5% to 35%. Other management and support staff will see their pay cut by up to 15%. The planned reductions are part of its incentive program and equity-based compensation. A hiring freeze is also in effect and merit increases for managers and support employees are being suspended.
A voluntary buyout plan is being offered to its American-based management and support employees, who have until Jan. 12 to join the program.
Other companies that might do well to join Caterpillar in cutting executive pay are General Motors and Chrysler, which recently won a federal bailout to avoid bankruptcy. Part of the federal loan requirements is that the car companies cut executive pay and show good management by March 31; otherwise the loans must be paid back immediately.
Chrysler recently had to pay about $30 million in retention bonuses to its top executives while it cut thousands of jobs. The bonuses were owed under its contract with about 50 executives that was set up before DaimlerChrysler sold the Chrysler unit.
Aaron Crowe is an unemployed journalist in the San Francisco Bay Area. Read about his job hunt at www.talesofanunemployeddad.blogspot.com