What we hear on the street: The executive suite is being hard hit in 2009

What we hear on the street: The executive suite is being hard hit in 2009

HONEY FOR WORKER BEES – Average raises for around 67% of non executives this year will top out at 3.2%, though raises will drop to 3.0 percent next year for about 88% of those non-exec workers.

There has been much rhetoric regarding the movement of salary structures and employee raises for 2009-10. The first results are now coming in. It appears that salary increases are less than in prior years (no surprise). And, there is an actual occurrence of broad-based “zero” salary changes for employees.

Preliminary data from Mercer (2009/2010 US Compensation Planning Survey) for 2009 shows that roughly 70% of employees in non-executive positions received salary increases that averaged 3.2%. For the same non-executive group, 88% are expected to get slightly smaller raises in 2010. [See our May 2009 E-Notes regarding the practice of broadly withholding salary increases.]

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Executive positions, however, have fared much worse when it comes to salary increases. In the same survey, only 56% of executive positions received increases in 2009 that averaged 3.5%.

Further, we recently did an analysis of 2009 proxies for select insurance providers. It revealed that many CEOs and other top executives (the majority of the sample) did not earn a salary increase or annual incentive for 2008 performance. However, long-term incentives grants (generally options and restricted stock) were granted to most senior executives in the proxy sample early in 2008 in amounts seen in prior years—or somewhat lower.

Bottom line: The 2009 salary emphasis seems to be on keeping the general employee happy and in-place while letting the guy in the corner office feel the pain—may be a bit of theatre here. However, if I were on the Board of Directors, I would aggressively be using long-term incentives to keep my CEO and other key players happy this year—we can fix their salaries later.

We expect to see more salary data reported for 2009 and predictions for 2010 in mid to late summer. What a crazy 12 months–we found it almost impossible to predict how salary increases and structure movements would come out for 2009 based upon changing conditions and are glad to see some logic and stability in the early data. Perhaps 2010 will bring more stability and a return to somewhat normal practices.

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