Finance

Should executives share in the cost-cutting pain?

Executives at companies doing layoffs and cutbacks largely don't comment on what may happen to their own salaries
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It seems like the past six months have seen major companies making layoff announcements one after another. From the tech world (most notably Twitter) to investment banks such as Goldman Sachs and Morgan Stanley, companies are once again looking at ways to cut costs.

But there’s been one piece of information that hasn’t been widely shared by companies shrinking their workforces: how executives are personally sharing in financial loss, whether through a pay reduction or other means.

Layoffs affect not only the employees who were let go, but the company’s remaining workers as well, and now another stakeholder group may also be watching more closely: consumers. Oxford University researchers found in a study published in 2021 that consumers prefer firms that prioritize paying employees over CEOs during a financial crisis. The study, which specifically polled retail worker wages, wrote that a “firm’s commitment to maintaining employee pay leads to the most positive consumer reactions.”

CFO Brew reached out to BigCommerce, Thumbtack, Blue Apron, Airtable, and Plaid, all of whom laid off employees in December 2022, seeking comment on whether executives would be taking pay cuts, and if the company had considered such cuts as a way to reduce costs before laying off employees. Most of the companies did not respond to our request for comment; Plaid declined to comment.

C-suite execs taking pay cuts for events out of their control is not a foreign concept; many top executives forfeited their salary, in some way shape or form, during the Covid-19 pandemic. In 2020, Dick’s Sporting Goods CFO Lee Belitsky’s pay was cut 50% ($686,200 in 2019) at a time when the company closed over 800 stores across the country. In 2021, his salary was reinstated and raised to $794,375, per the company’s proxy filings. In Germany, Puma CFO Michael Laemmermann forfeited his April 2020 salary, along with the CEO and chief sourcing officer, in line with the announcement that general managers would also be taking a cut. More CEOs versus finance chiefs made public salary cut announcements, but the CFO tends to avoid the spotlight even in more positive announcements.

The market will have to wait for annual filing time to uniformly compare executive salaries from 2022–2023, but we have yet to see any executives sharing in the cost-cutting pain this time around.—KT

News built for finance pros

The latest news and insights corporate finance professionals need to know to keep up with their constantly evolving industry.