FedEx cuts salaries instead of jobs

Business First:

Rather than slash jobs, FedEx Corp. announced Thursday it would institute a hiring freeze and cut salaries, including that of CEO Fred Smith.

Beginning in 2009, Smith will scale back his salary by 20 percent. Other senior executives will receive a 7.5-10 percent salary cut. U.S. salaried employees will receive a 5 percent cut.

The cuts will help FedEx save more than $200 million in the remainder of fiscal year 2009 and $600 million more in fiscal 2010, helping offset what the company projects as “weak demand” for the upcoming year. The shipping giant did add a caveat to Thursday's announcement: Each of FedEx's operating companies "is evaluating other measures should business conditions further deteriorate," according to a company release.

On Dec. 9, FedEx dropped its 2009 projections, sending shares of FedEx on its steepest decline in 20 years. Shares fell 14.48 percent, or $10.78, before closing at $63.65.

...
The rationale for cutting jobs rather than salaries usually revolves around morale issues. FedEx has chosen to challenge that belief. It will be worth watching whether keeping the employees is a better morale bolster than keeping the salaries.

Comments

  1. NJ-Private Investigator7:47 PM

    This is definitely not a MORALE booster and the fact the CEO takes a 20% pay cut on a $1.5 million in salary is a joke. Compare that to someone that makes $75,000 and took a 5% paycut after earning that increase over a 2 year period. I busted my hump for that increase and they take it away in decision that is not going over well with lower level management.

    ReplyDelete
  2. imakeller9:01 AM

    It depends how you present it. I agree no one feels sorry for Fred Smith taking a 20% hit. However, if Management said the salaried workforce could elect to take a 5% pay cut for 2009 or the company would cut X thousand jobs, I believe people would take the pay cut. I know which option I'd vote for.

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