Leading by Example: Governor Andrew Cuomo’s Pay Cut
New Year’s Day was also the start of a new job for Andrew Cuomo who took office as Governor of New York. One of his first agenda items was to balance the budget, which currently is in deficit by billions, by freezing the pay of state workers. While it seems to be a fact that when it comes to trickle-down economics, prosperity flows to the lower classes like an intermittent drizzle while poverty spreads like a flood, in this case Cuomo is walking the walk by cutting his own salary by 5%.
While 5% is hardly “slashing” one’s compensation, this sort of parity in pay cuts is something that is seldom seen in a “rich get richer, poor get poorer” world. For example, at one point during Michael Eisner’s tenure at Disney, he cut 4,000 jobs and yet netted a cool $72.8 million the prior year in salary, bonus and stock options.
Obviously Eisner wasn’t feeling the squeeze of a “challenging economy.”
During the latest economic challenge, however, we’ve witnessed some notable executive pay cuts. Following the government bailout of Wall Street, AIG CEO Edward Liddy took a $1 salary for 2008 and 2009. Unfortunately, Liddy’s successor Robert Benmosche threatened to quit a mere three months after taking the CEO position over the company-wide pay restrictions that came along with the government aid.
Similarly, Rick Wagoner, GM CEO, took a pay cut from $2.2 million to $1.00 in 2008 as part of a corporate restructuring effort to win approval for government loans. As with AIG, however, Wagoner’s successor Fritz Henderson refused to follow suit. Although to be fair, Henderson’s compensation was already just a fraction of Wagoner’s–especially given the 30% pay cut he received due to the acceptance of government assistance as well as declining value of his stock options.
Motorola co-CEOs Greg Brown and Sanjay Jha continued their 2009 salary reduction of 25% in 2010 earning them inclusion on The Motley Fool’s Corporate Heroes list along with Starbucks CEO Howard Schultz who asked Board of Directors to reduce his $1.2 million salary to less than $10,000.
According to an MSNBC article, however, these CEO voluntary pay cuts aren’t the huge cost-cutting measures they seem to be. CEO salaries are merely the tip of the iceberg in overall compensation of bonuses, stock options and other perks.
But while these salary reductions aren’t as heroic as pitcher Cliff Lee spurning the Yankees for the Phillies and accepting a contract that paid ten of millions less than what the New York club had offered. (Or course, most of us would stop counting at say 10 or 20 million–much less the $120 million Lee ended up signing for…) or as altruistic as when Colin Farrell, Jude Law and Johnny Depp donated their fees to the late Heath Ledger’s daughter when filling in due to his untimely death in The Imaginarium of Doctor Parnassus, it’s certainly a refreshing step in the right direction.
Have you ever experienced a layoff or pay cut? Do you agree with Governor Cuomo that economic cutbacks should start at the top?