As companies endure difficult times, some are maintaining one cost-cutting measure from the pandemic's early days: reduced pay for executives.
Executives at Zoom Video Communications, Intel and Micron Technology have taken cuts to their base salary this year as their businesses laid off workers and reduced spending, The Wall Street Journal reports. The cuts to base pay affected CEOs and extended to finance chiefs, operations leaders and corporate attorneys. Earlier this year, CEOs at Apple, Goldman Sachs, Morgan Stanley and other large companies also took pay cuts.
The practice of curbing executive compensation was widespread early on in the COVID-19 pandemic, as senior executives at hundreds of public U.S. companies adjusted their salaries while pay cuts, furloughs or layoffs affected non-managerial workers.
Executive pay cuts can be perceived as symbolic gestures in times of tight expense management and workforce reductions. When companies communicate executive salary cuts, they generally do not specify how much the cost savings amount to. Base pay is usually the smallest part of an executive pay package — it made up 11 percent of CEOs' overall compensation in fiscal year 2022, according to a study cited by WSJ of CEO pay at 300 of the largest U.S. public companies from Korn Ferry.
Hospitals and health systems that have reduced executive pay include Billings (Mont.) Clinic and University of New Mexico Hospital in Albuquerque. While pay cuts have not been remarkably common in the past year among hospital and health system executives, these organizations have been curbing administrative costs by consolidating executive teams and reporting structures. At least 17 health systems have made changes to their executive ranks and administration so far this year.
The C-suite in hospitals and health systems has been a source of intensified scrutiny over the past two years as staffing shortages, employee dissatisfaction and financial challenges sharpened the lens through which industry professionals and consumers view executive pay. Earlier in the pandemic, as hospitals and lawmakers urged federal authorities to investigate travel staffing agencies for price gouging, some travel nurses reciprocated and said such scrutiny should actually be redirected toward health systems' executive pay.
Regardless of whether one sees executive pay as appropriate or too high, its variation across settings is real. A 2022 analysis by the Lown Institute of more than 1,000 hospitals found the gap between hospital CEO pay and average worker pay varied widely, with some CEOs paid twice the rate of other workers, while the highest paid received 60 times the hourly pay of general workers.