The Great New Surge in CEO Self-Sacrifice: Is It For Real?

By Sam Pizzigati, Too Much: A Commentary on Excess and Inequality. Posted January 16, 2009.

Beware of CEOs who feel your pain. These days, that's not easy. They seem to be just about everywhere. With the economy in free-fall, CEOs all across the United States have begun waging a veritable empathy offensive. From Wall Street to America’s ultimate Main Street -- in Peoria, Illinois -- top execs are announcing what appear to be painfully deep pay cuts in their own personal compensation.

That’s the least we CEOs can do, the message goes, in these most difficult of economic times. You average folks may be hurting, but we’re hurting, too.

In Peoria, the CEO of the world’s biggest construction equipment company will this year see his total pay drop by up to 50 percent. The company, Caterpillar Inc., announced this executive pay slash in December, along with plans to trim employee wages by up to 15 percent, lay off workers, and subject plants to temporary shutdowns.

"We understand these decisions will disrupt the lives of many of our employees and their families," Caterpillar CEO Jim Owens noted apologetically, "and we regret the need to take these steps."

At Citigroup, the flailing global banking giant, top executives are regretting their plans to lay off 52,000 workers so much that they're denying themselves all the 2008 bonus cash they’re entitled, by contract, to collect.

"The most senior leaders," Citi CEO Vikram Pandit nobly announced in a new year’s memo, "should be affected the most."

Last week, Bank of America CEO Ken Lewis joined the ranks of CEO self-sacrificers. He’ll be asking Bank of America’s board of directors not to a times ward any bonuses to the bank’s top executive team.

"It is only fair," proclaimed Lewis, "that our most senior executives, who have been rewarded in past years when our company and stock price performed, should now share in the pain as performance has lagged."

Overall, notes the corporate consulting firm Watson Wyatt, about half of 264 recently surveyed major U.S. companies say they’ll be cutting executive compensation in 2009. Another corporate consulting firm, Equilar, has found that 26 major companies actually filed papers locking in CEO salary cuts in 2008’s final weeks.

So have we all become just one big economic family, with everyone sharing the sacrifices that hard times demand? Not exactly. The paycheck hits that CEOs have been so proudly announcing turn out, upon closer inspection, to be a lot more pinprick than pain. 

Take, for instance, the 20 percent "salary cut" that FedEx CEO Fred Smith is now swallowing. Or the 25 percent salary dip for Motorola co-CEOs Greg Brown and Sanjay Jha. Or the 33 percent ax to the salary of Western Digital chief exec John Coyne.  

These all seem serious sacrifices. But salary cash only makes up a minor part of CEO pay packages. Top executives take in much more in stock and other incentive awards than they do from straight salary.

Essentially, notes Equilar research manager Alexander Cwirko-Godycki, CEOs who announce "salary cuts" are merely "cutting a portion of the smallest part of the pay package" that comes their way.

And all those bonuses that the top execs in high-finance are giving up? Maybe not such a mammoth sacrifice either. Consider the now bonus-less Citigroup CEO Vikram Pandit.

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Sam Pizzigati is the editor of the online weekly Too Much, and an associate fellow at the Institute for Policy Studies.

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