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June 23, 2018

Bosses Take Pay Cuts to Keep Others Working

Amy Keller | 8/1/2009

Bill Harrell says he and other senior partners “figured our children are grown and we don’t have to make $5 million a year. It’s bizarre to me that people in corporate America would take $30 million bonuses and lay off 60,000 people.” The senior partners at Harrell & Harrell law firm decided to forgo their bonuses. [Photo: Kelly LaDuke]
When they saw the economy starting to slide in early 2007, the five senior partners at Harrell & Harrell law firm in Jacksonville (No. 5 Midsized) went on a cost-cutting binge and also did something much bigger: They quit taking their bonuses, the multimillion-dollar perks that sweeten the lives of successful trial lawyers. The tactic has been particularly timely: Of the 60 paralegals and support staff at the firm, 14 of their spouses have been laid off from jobs in the construction or real estate industry because of the downturn.

At companies throughout the state, business leaders and senior managers are opting to take large pay cuts themselves in order to avoid cutting the salaries of rank-and-file employees or eliminating jobs altogether.

Executives at PSS World Medical in Jacksonville (No. 9 Large), for instance, chose to take a 5% pay cut earlier this year so they could give all other staffers a 2% raise. CEO David A. Smith says it’s his goal to lead the company through the downturn with no layoffs. In nearby St. Augustine at Davidson Realty (No. 2 Small), President Jim Davidson and Ed Gil, vice president of finance, have gone without pay for more than a year in order to avoid further layoffs at the development company and real estate brokerage. The company was forced to lay off two of 22 employees because of the real estate downturn but has kept up full salaries and health insurance, for which it pays 100% of employees’ contributions, an IRA and other benefits. “The mission statement is ‘value people first — before, over, and above everything else,’ ” says Controller Cindy Vaughn. “Going without pay to retain the rest of us makes it pretty clear that they mean that.”

Last year at Raymond James (No. 8 Large), CEO Tom James froze the salaries of all employees at the vice presidential level and above and awarded lower bonuses, while associates at the firm received their annual increases and usual bonuses. “Tom believes it has to start at the top. Quite frankly, in really good times, the people at the top tend to benefit more, but in bad times they have to take a bigger hit,” says Angela Biever, chief administrative officer.

This year, however, the company has opted not to give associates pay increases either but still anticipates paying bonuses, albeit smaller. Biever admits that James wrestled with the decision. “Tom kept waiting and waiting. He ended up sending out a note to all employees saying there would be no salary increase. He talked about how tough it was.” Biever says that the company’s employees took the news in stride: “We all understand it’s a tougher time and the company won’t make as much money this year as last year.”

Several companies that have imposed across-the-board pay cuts report that they have shifted more of the burden to higher-level employees. At Shared Technologies (No. 2 Midsized), all employees under the director level with a base salary of $40,000 were given a temporary 5% pay cut, while directors and above took a 10% hit. The company’s CEO “took a significantly higher pay cut,” says company representative Katy Moreno.

While a few companies such as Seaside National Bank & Trust in Orlando (No. 1 Midsized), Veredus Corp. in Tampa (No. 14 Small) and AgencyNet in Fort Lauderdale (No. 18 Small) have managed to avoid layoffs, pay cuts and furloughs altogether, other firms have opted for layoffs instead of pay cuts. ABB Concise (No. 21 Midsized), a Coral Springs company that distributes contact lenses and other optical products, reduced its workforce by 8% in 2008, eliminating the jobs of “lower producers” and some duplicate management resulting from a previous acquisition. “We felt it was important not to reduce benefits and pay to our front-line employees. By keeping these dollars whole along with potential raises helps us to keep our ‘A’ players along with attracting others,” says Nan Callan, an executive coordinator at ABB Concise. “We prefer to concentrate heavily on other expenses that we can control or cut back versus cutting pay and benefits as this keeps our employee base motivated.”

When Tampa-based accounting firm Pender Newkirk (No. 15 Midsized) experienced a downturn in business, partner Ralph Garcia says he “struggled” with how best to reduce company expenses. “Do you spread the pain? Or do you really just try and right-size the company for the amount of work that you have?” He ultimately arrived at the same conclusion as ABB Concise and laid off employees. Although Garcia tried to cushion the blow — he prepared a severance package for those who were let go and tried to help them find other jobs — it still wasn’t easy. “If I could write a book about how to effectively lay off people, I’d become a millionaire.”

Tags: Banking & Finance

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