Just a few days after laying off roughly 800 workers, executives at heavy-equipment maker Caterpillar revealed its top officers will see a substantial reduction in their compensation next year.
Executives will earn as much as 50 percent less in 2009, according to a statement issued Monday, December 22, by the maker of construction and mining equipment. In addition, senior managers at Caterpillar will take pay cuts of anywhere from 5 to 35 percent next year compared with their salaries from 2008.
Details of the plan were not disclosed, but Caterpillar noted the lower levels of compensation would result largely from “reductions in the company’s incentive compensation program and equity-based compensation.”
Therefore, it seems clear that executives at Caterpillar stand to take a considerable hit from the company’s cost-cutting move.
Last year, the top seven officers at Caterpillar earned about $51.1 million in combined compensation, according to the company’s latest proxy filing. If the compensation reduction measures announced Monday were applied to all forms of executive pay acknowledged in the proxy—including stock and option grants—the top officers at Caterpillar could see their total take-home lowered by more than $25 million next year.
Chairman and CEO Jim Owens would take the biggest loss, as he earned more than $17 million in total compensation, according to the proxy filing.
According to Financial Week’s database of the highest-paid finance chiefs, Caterpillar CFO D.B. Burritt received $2.5 million in overall compensation last year. Option awards made up more than a quarter of that total.
Aside from the move to lower executive and senior management compensation, Caterpillar officials said they would suspend any increase in merit pay for “management and support employees” and have put a hiring freeze in place. These workers were also given the option to participate in an “incentive-based voluntary separation program.”
Specific details of that plan were not disclosed.
Filed by Mark Bruno of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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