- Career Survival Tips: Putting Out Fires
- Are You in the Wrong Job?
- Why CEOs Can't Get It Right When They Try to Say ‘Thanks’
- CEO to CEO: Why Your Strategy is Failing
- Office Etiquette: Mind Your Manners
- Stressed Out? Here's How Leaders Cope
- Dreaming of Quitting Like that Goldman Sachs Exec? Five Reasons Why You Shouldn't
- The Biggest Mistakes When Hiring Someone New
MOST SHARED
- JPMorgan Trading Loss: Did Regulators Miss the Risk?
- How Boaz Weinstein and Hedge Funds Outsmarted JPMorgan
- Marc Faber: 100% Chance of Global Recession
- RIM May Cut at Least 2,000 Jobs in Restructuring: Report
- How Nasdaq Lost Control of Facebook IPO, by the Minute
- As Bank Loans Dry Up in Spain, Small and Medium Businesses Fight for Life
- Citigroup Lost $20 Million on Facebook IPO Trades
- The Biggest Market Myth There Is?
- Judge Says Skilling Can Seek New Trial
- What College Tuition Will Look Like in 18 Years
- A New Look at the ‘New Poor’
- Six Pack: Beer Buzz of the Week
- Greek Exit Could Trigger 50% Fall in Euro Stocks: Analyst
- Under Pressure, FHA Skews to Wealthier Home Buyers
- Big Stock Upside for Hudson City Deal: Analyst
- 5 High-Yield Stocks Ready to Boost Dividends
- Yoshikami: Four Things You Need to Know About Gold Now
- Steinbock: The Euro Zone Endgame Begins
- Option Bulls Take Another Shot on Idenix
- How Nasdaq Lost Control of Facebook IPO, by the Minute
- Week Ahead: Europe Has Wall Street Bull on Short Leash
- Pro-Bailout Greeks Regain Lead in Polls Before Vote
- Citigroup Lost $20 Million on Facebook IPO Trades
- JPMorgan to Shake Up Risk Team After Big Loss: Report
- RIM May Cut at Least 2,000 Jobs in Restructuring: Report
- EU Finalizes Bank Reforms; Shifts Burden to Bondholders
- Spain's Bankia Eyes Stake Sales After Record Bailout
- EU Set to Launch Action Against China Over Telecom Aid
Text Size 
Pay Cuts: Taking One for the Team
 |
iStockphoto |
With the economy in a deep sleep, private and public institutions are cutting costs with a vengeance.
Companies have closed plants, dropped less profitable product lines, laid off workers, sliced benefit programs and installed furlough programs. Similarly, states, municipalities, and school districts have grappled with all manner of cost cutting and now—more than a year into this miserable cycle—everyone is hitting bone.
The fat was gone before 2009 dawned and we’ve been hacking at muscle all quarter.
 |
With nowhere else to cut, companies are turning to their surviving workforce and asking for (or mandating) salary cuts. Late last week, the venerable New York Times [NYT
Loading...
()
] announced a temporary 5% pay cut for non-union workers and requested its unions accept the same. (If the unions say no, the company said there would be more layoffs.) FedEx [FDX
Loading...
()
]was one of the first Fortune 1000 companies to cut pay and dozens have followed suit. It now seems to be high season for pay cuts.
What is fair? It is certainly fairer to ask employees to take a pay cut if the company is losing money versus a company that is profitable. Employees are probably less supportive of companies that are profitable, but are committed to increasing profitability. Ironies abound, especially in the public sector.
If a public company doesn’t grow, the markets will punish its stock price and the same employee who would complain about a pay cut would also complain about a drop in his portfolio value or 401k plan. Private companies don’t have quite the same time pressure or scrutiny, but do rise and fall under the same capitalistic framework.
Once a company has made maximum use of discretionary cost cuts and has scaled back operations to maximum effect, it is better to deploy pay cuts to keep as many valuable workers as possible.
If you are at that point as a manager or executive, it’s critical that you and other managers take the same medicine you are forced to dole out to employees. Cuts have to be across-the-board. Obviously the more highly paid the employee or executive, the bigger the cut – but the fairness is in the proportionality.
Also, the pay cut should be seen as temporary since it has been caused by what we all hope will be a temporary drop in revenues to be repaired when the economy starts to recover.
Finally, it’s helpful to give as much notice as possible since so many employees live paycheck to paycheck and might need to make adjustments to stay above water at home.
________________________________
Erik Sorenson is chief executive officer of Vault.com, Inc. Mr. Sorenson, 52, oversees the strategic direction of the global, New York-based media company. He is widely regarded as an expert on media strategy and industry trends, with experience spanning radio, local and network broadcast television, cable and syndicated TV, and the Internet. From 1998 through 2004, Mr. Sorenson served as president of the MSNBC cable news channel. He has won more than twenty Emmy awards as a writer, producer, and television executive. Comments? Send them to
POPULAR EXECUTIVE CAREERS POSTS
- Career Survival Tips: Putting Out Fires
- Are You in the Wrong Job?
- Why CEOs Can't Get It Right When They Try to Say ‘Thanks’
- CEO to CEO: Why Your Strategy is Failing
- Office Etiquette: Mind Your Manners
- Stressed Out? Here's How Leaders Cope
- Dreaming of Quitting Like that Goldman Sachs Exec? Five Reasons Why You Shouldn't
- The Biggest Mistakes When Hiring Someone New
Data is a real-time snapshot *Data is delayed at least 15 minutes
