Corporate Finance & Governance | Financial Planning | Leadership / Management

Bonuses? Corporate America says, ‘We’re not worthy’

BonusThink they talked to the folks at AIG for this one?

A new survey from Watson Wyatt has found sharp increases in the number of companies that are freezing salaries, eliminating bonuses and adding "clawback policies" that reclaim portions of executive pay in the wake of poor financial performance.

In December, 21 percent of companies surveyed said they were freezing executive salaries; that number jumped to 55 percent in the most recent survey. Forty-eight percent of companies are planning to reduce their bonus pools by an average of 40 percent. Nearly one in four have added clawback policies.

“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, Watson Wyatt's North American co-leader of executive compensation consulting.

That stands in stark contrast to AIG, which has come under extraordinary fire for extending $165 million in executive bonuses after receiving more than $180 billion in federal bailout funds. Nine of the 10 biggest AIG bonuses have since been returned.

As rage-inducing as those AIG bonuses are, there are those who believe we can't afford the time or effort we are putting into our outrage, and I tend to agree with them. A better exercise is to examine what got us to this point in the first place, which Time's Bill Saporito attempts to do in this article. The next step is to make sure we don't travel down that path again.

What are the odds?


Bill Sheridan