Finally, Some Well-Deserved Pay Cuts - InformationWeek
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10/2/2009
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Dave Methvin
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Finally, Some Well-Deserved Pay Cuts

This week's public filings from Microsoft showed that in addition to cutting people, the company has cut executive pay in reaction to their revenue downturn. It's good to see that some companies are still willing to hold their executives responsible for poor performance.

This week's public filings from Microsoft showed that in addition to cutting people, the company has cut executive pay in reaction to their revenue downturn. It's good to see that some companies are still willing to hold their executives responsible for poor performance.The real story here is about "optics," as public relations experts like to say. We've seen the horrible behavior of banking execs who seem to have no qualms about paying out tens of millions of dollars for salary and bonuses, even as their banks accept billions in taxpayer money. Executives in plenty of other industries have drawn huge salaries and bonuses, despite their company profits sinking into negative territories. It's a welcome sign when any company's executives are willing to take a pay cut as a reflection of the company's own performance and an implicit acknowledgment of their role.

In response to Microsoft's 3 percent annual drop in revenue -- the first in company history -- the company cut CEO Steve Ballmer's salary from $1.35 million to $1.28 million. COO Kevin Turner saw his compensation drop from $9.2 million to $7.9 million. Overall, Microsoft executive compensation was down nearly 30 percent from last year. Things aren't likely to get a lot brighter for the top brass next year; the company said it was eliminating fiscal-2010 merit increases for executives at the same time they announced layoffs in January.

Now I'm not going to shed a tear for Ballmer and his buddies, since they still are making a ton of money in annual salary by anyone's measure. Since many of them own significant chunks of Microsoft stock, they have plenty of assets left even at Microsoft's languishing share price; Ballmer alone owns nearly 5 percent of all Microsoft stock. Yet I do applaud Microsoft and its executives for setting a good example by doing the right thing. Perhaps it's mostly a symbolic gesture, but it's a lot better than the middle-finger gesture we've been given by financial sector executives.

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