Earlier this month, Watson Wyatt surveyed 145 large U.S. based organizations to determine the effect that the economy is having on their executive pay programs, a repeat of a similar study done last December in order to examine trends over recent months. Survey results suggest that companies - at least the large ones represented here - are making some pretty dramatic changes to their programs.
Some key findings from the study:
55% of respondents have frozen executive salaries (up from 21% in December).
20% have reduced, or are considering reducing, executive salaries (up from 8% in December).
- 38% are making changes to their annual incentive plan performance measures (up from 29% in December).
Long Term Incentives
30% are making changes to their long-term incentive plan performance measures (up from 21% in December).
36% have changed or plan to change the type of LTI vehicle used. Of these, 43% are putting more emphasis on time-vested restricted stock and 32% are putting more emphasis on performance-based shares.
33% expect to reduce their LTI dollar grant values compared to the prior year (up from 23% in December).
42% expect to grant more shares compared to the prior year.
Most companies are managing with the shares they already have; 59% do not plan to request additional shares earlier than expected.
Only 1% have taken action on their underwater stock options, but 17% are considering action in the next 12 months.
The Issue of Excessive Risk
- Only 9% have made changes to their executive compensation program to address the issue of "excessive risk", with another 3% planning to do this in the next 12 months.