Top bosses' pay cut at IBM, Avon Moves could be tied to mounting public outrage.

February 25, 1992|By Linda Grant | Linda Grant,Los Angeles Times

In what could be among the first corporate responses to mounting public outrage over excessive executive pay packages, two big companies have disclosed that they will trim total compensation paid to top officers.

International Business Machines Corp. said in its annual report, released yesterday, that Chairman John F. Akers expects his total salary plus bonuses for 1991 to be cut by an estimated 40 percent, to less than $1.6 million, subject to board approval.

At the same time, James E. Preston, chairman and chief executive of Avon Products Inc., has frozen his salary and lowered his bonus in exchange for stock options that will more directly tie his pay to the company's performance, Avon said yesterday.

At IBM, four other top managers, members of the corporation's management committee, will receive cuts estimated at about 40 percent along with their chief. About 60 corporate officers below them also will see their pay shrink by 10 percent to 20 percent. The reductions reflect IBM's dismal results for the year, when the company suffered its first annual loss.

Last year, Mr. Akers and other management committee members came under heavy criticism from IBM employees. As earnings plunged and employees' pay was largely frozen, top executives pocketed pay increases of 33 percent to 43 percent, plus sizable stock awards.

At Avon, Mr. Preston said no complaints had been heard about his $610,000 annual salary, plus a 65 percent bonus tied to net income and cash flow targets. But he said he had decided last summer to review his salary package because built-in increases would cause it to total as much as $1.7 million a year in five years, an amount he judged excessive.

In addition, General Motors Chairman Robert C. Stempel indicated yesterday that the automaker was unlikely to slash pay beyond the 50 percent cut in total compensation to top officers already in effect for each of the past two years, through the elimination of stock and cash bonuses. But GM did confirm that its board has ordered a watering down of executive pensions.

Not all companies are making concessions, however.

At Champion International, Chief Executive Andrew C. Sigler has chosen to fight.

He hired Champion adviser Ira M. Millstein, a prominent New York attorney, to challenge Graef S. Crystal, a compensation expert and author of the recent book "In Search of Excess," which criticized many executive pay plans as excessive.

Mr. Crystal devoted several pages in the book to criticism of Mr. Sigler's 1990 pay. Champion, a Stamford, Conn.-based paper products concern, values Mr. Sigler's package at $1.2 million and Mr. Crystal values it at $3.5 million.

Separately, Mr. Crystal, a professor at the University of California Berkeley, will be allowed to submit only one more column for publication in Financial World magazine, on a pre-approved topic, after the current issue, which just went to press, the New York Times reported.

Geoffrey N. Smith, the magazine's editor, said Financial World had decided not to renew Mr. Crystal's contract when it expires in September.

"There's some technical aspects we didn't always agree with," Mr. Smith said.

Mr. Crystal said by telephone from his home in Napa, Calif., that Financial World had succumbed to pressure from advertisers in canceling his column, the Times said.

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