As prices of gas and food have crept up while wages have remained largely stagnant, many Americans are feeling the squeeze. Even if you haven’t been laid off, you may face a furlough. Even if you don’t face days off without pay, you may still be suffering under a wage freeze. And even if you get a 1% or 2% raise, that may not keep pace with inflation the way things are going.
Throw in the stock market antics messing with your 401(k) or IRA and it can be depressing to look at your bank account.
Since misery loves company, perhaps it’s worth pointing out big-name companies where CEO compensation has also been on the decline – sometimes with executives taking as much as a 50% haircut. You may find it comforting to know that even the guys at the top are feeling the squeeze.
Of course, the median household income in America is roughly $50,000, so it’s hard to have sympathy for these corporate leaders. In that case, the big numbers may only irritate you more.
At any rate, here are five popular consumer-brand companies that cut CEO compensation, according to recent financial reports:
Sony (NYSE:SNE) announced its third straight year of losses just several weeks ago, and as a result Chief Executive Howard Stringer took a 16% pay cut. Of course, the fact that he “only” makes $4.27 million probably isn’t going to break his piggy bank. On top of a continued slide in revenue, Sony is trying to repair its brand after hackers wreaked havoc on its online gaming operations, the PlayStation Network. We’ll have to wait and see if this cut was just a weak PR move or a sign that the company actually is committed to correcting its free fall.
Nintendo (PINK:NTDOY) President and CEO Satoru Iwata was named one of the top chief executives in the world back in 2007 by Barron’s. But after Nintendo’s much-lauded 3D handheld video game device flopped resulting in full-year earnings estimates to be slashed by over 80%, Iwata pulled the plug on 50% of his salary. His compensation went from around $1.7 million down to under $900,000 annually. We’ll see if Iwata’s pay cut and the $80 markdown in price to the Nintendo 3DS gaming console helps any.
Wells Fargo (NYSE:WFC) CEO John Stumpf took a small pay cut to a mammoth salary in 2010 — his compensation, which was valued at $17.6 million in 2010, was down from about $18.6 million in 2009. That’s about a 6% cut. Nobody is crying for Stumpf and his missing millions, it’s important to note that he took this cut even while helping Wells Fargo post record income of $12.4 billion in the previous fiscal year. What’s more, his salary was only about 18% of his pay – with a performance-based stock bonus of $11 million and a cash bonus of $3.3 million really juicing his pay. This is a good example of a CEO working hard for the company but not breaking the bank with greedy demands. The fact that Wells’ balance sheet improved even as Stumpf took home a little less is something WFC stock holders can feel pretty good about. Though admittedly, $17.6 million is still a heck of a lot to be shelling out to one man.
Nike (NYSE:NKE) has seen a similar tale unfold. CEO Mark Parker was paid nearly 16% less last year, even as the company posted big revenue and earnings gains that topped expectations. In real terms, Parker received a little more than $11 million in total compensation for 2010 compared with $13.1 million in 2009. Again, nobody is going to be taking up a collection for Parker. But shareholders have certainly been served as Nike stock is up 30% in the last 18 months and 18% in the last year, due in large part to a 12% jump in annual profit. It’s a separate debate to consider whether CEO salaries in general have become way too bloated, but it’s worth noting that Nike is at worst not overinflating the bubble and at best taking a more reasonable approach to
compensation than some peers.
UnitedHealthGroup (NYSE:UNH), the mammoth insurance company worth about $50 billion that may provide your benefits, is another company that is booming but has seen its CEO pay move in the other direction. UNH has repeatedly blown away Wall Street earnings estimates, topping EPS forecasts by more than 23% in each of the last four quarters and seeing impressive full-year results. Even so, CEO Stephen J. Hemsley saw his total pay cut by more than half in 2010. True, what he makes is still obscene – a mere $48.8 million compared with $102 million in 2009. But like Wells Fargo’s Stumpf, he saw his salary decline even as the company improved. Also like Stumpf, he received the bulk of his pay in UNH stock that was vested to him and through stock options exercised. That means his gain was predicated on the company’s gain. This is clearly a better model, where CEOs have a big financial incentive to create shareholder value.
Jeff Reeves is editor of InvestorPlace.com. As of this writing, he did not own a position in any of the stocks named here. Follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.