NEW YORK, June 18 (Reuters) - Meritor Inc employees and executives who saw their salaries slashed in the wake of the COVID-19 pandemic can recoup lost pay for this year as long as the company meets new performance targets, the trucking parts supplier said this week.
The Troy, Michigan-based company is one of the first to roll out such a plan after imposing pay cuts of up to 60% for its top brass and staff. It shut down production at most of its manufacturing plants in March amid a global freight downturn due to the coronavirus pandemic.
Some compensation experts said Meritor’s move could offer a template for companies that are looking to incentivize staff as the pandemic’s economic fallout eases.
Meritor’s plan allows executives and employees to recoup compensation they lost because of this year’s pandemic-induced pay cuts, if the company hits certain liquidity and cost reduction targets, according to a regulatory filing published on Tuesday.
The announcement follows an earlier move by Meritor to partially reverse the pay cuts. On June 2, the company said that pay cuts of 50% to 60% it had unveiled on March 25, in the wake of the pandemic, would be reduced to 10% to 20%.
About 20% of 1,000 companies surveyed by consulting firm Arthur J. Gallagher & Co cut employee pay in response to the pandemic. The vast majority of those planned to reverse the pay cuts subject to market conditions, according to the survey.
Companies have to toe a thin line between rewarding executives and keeping investors, who have suffered losses, happy.
Meritor’s shares are down 23% year-to-date, compared to a 4% drop in the S&P 500 Index.
Marc Hodak, a partner at Farient Advisors LLC, said shareholders may support the incentive program should Meritor’s shares improve.
Socially conscious investors, however, are likely to protest the move on the basis that the pay of already well-compensated executives should not be shielded, he said.
Meritor declined to give further details on the plan.
Meritor employed 9,100 people as of the end of last year. In June, the company began laying off 8% of its global salaried workforce. It also laid off some hourly workers. (Reporting by Jessica DiNapoli in New York; Editing by Greg Roumeliotis and Aurora Ellis)