Companies Adjust Pay Plans in Wake of Market Downturn

20 April 2009

Sarah Wilson

EU regulation

Manifest's North American partner, PROXYGovernance Inc has seen a trend by some US companies to adjust their pay components in response to the market drop and economic downturn – often by suspending long-term incentive pay in favor of more stock and option grants.  At Honeywell, for example, the company said that “upon consideration of the prospective volatility of operating results in 2009 in light of the challenging global conditions” it would “be difficult to set meaningful targets” for its 2009-2010  long-term cash-based compensation plan.  So it increased option grants for executives (including 950,000 options for its CEO) and awarded restricted stock with a three-year vesting period.  Similarly, at Manpower Inc., the compensation committee suspended the performance share program in favor of more options and stock because “ the volatility of current economic conditions made it impossible to establish a meaningful financial goal for the 2009-2011 performance period.”  PROXYGovernance took a negative view of these moves in its reports, concluding that by simply awarding more options and restricted stock near the bottom of a steep market downdraft, the committees were essentially side-stepping their responsibility for aligning executive pay with performance.

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