Though a pay cut by top executives may not solve a company's financial troubles -- it's likely to save only thousands of dollars compared with millions that can be sliced through layoffs -- some contend it can send a message of solidarity to workers worried about their own jobs and families.

Behind a pay cut, said Fred Cook, chairman of Frederic W. Cook & Co. Inc., an executive compensation firm, is the notion that ``sacrifice and pain should be shared'' by all.

``If you just cut the CEO's salary in half, and make no other changes, it doesn't make any difference because it's too small an item,'' said Cook, who has seen little evidence of pay cuts in this downturn. But clearly, he said, ``It's symbolic.''

To be sure, a number of executives will see their bonuses slip -- or disappear altogether -- since many are tied to performance. Ford Motor Co., which is cutting up to 5,000 white-collar jobs in North America, is one that won't hand bonuses this year to 6,000 top executives, including Chief Executive Jacques Nasser.

But few in the auto industry or any other business have followed the lead of Lee Iacocca. As head of Chrysler in the late 1970s, Iacocca took just a $1 salary as the car company struggled to stay out of bankruptcy.

TIME FOR SOUL SEARCHING

One executive who has taken a cue from Iacocca is Cisco Systems Inc. CEO John Chambers, who voluntarily cut his salary to $1 a year in April. Cisco, which is lopping off 8,500 jobs, paid Chambers a salary of $323,000 and a bonus of $1 million in the fiscal year ended July 29, 2000.

Reeling from the attacks last week on the United States and a slowdown in travel, the airline industry has also seen some executives take pay cuts in the past two weeks.

Jonathan Ornstein, chairman and chief executive of Mesa Air Group Inc., said he and the company's president would cut their base salaries by half while the rest of management would take a 20 percent cut. The company is slashing 700 jobs.

Frontier Airlines, while announcing 44O job losses, said it cut executive pay by 20 percent to 40 percent.

But executives at the nation's largest carriers, which have announced sweeping layoffs, have not publicly unveiled plans to trim their own salaries.

United Airlines, a unit of UAL Corp. , and American Airlines, a unit of AMR Corp. , announced jobs cuts of about 20,000 each this week. Boeing, the world's top jet maker, said it would lay off between 20,000 and 30,000 workers.

But when unveiling the job cuts, none of the companies made mention of executives taking lower salaries -- a fact that may not sit well with employees or the public.

``I think that each and every one will have to do some soul searching and come up with the answer to what is the value of being aligned with employees,'' said Judy Fischer, managing director of the Executive Compensation Advisory Services in Alexandria, Virginia.

WORKING TO RIGHT THE SHIP

While thousands of this week's layoffs have related to airlines, job cuts over the course of this year have been spread across nearly every U.S. business.

Chemical company DuPont Co. has announced 5,500 layoffs without mentioning executive pay cuts. International Paper Inc. , Lucent Technologies Inc. and EMC Corp. have also announced big layoffs. None gave an indication at the time of the layoffs that top management would cut base salaries.

Given worries about a recession after last week's attacks, a gesture by CEOs may mean that much more to workers, said Bill Patterson, the director of the office of investment for the AFL-CIO, a union which represents about 13 million workers.

``Worker loyalty is particularly important at this moment when there's so much uncertainty about the direction of the economy,'' he said. Now, he added, is a good ``opportunity to have shareholders demand parallel sacrifices.''

But Fischer, of Executive Compensation Advisory Services, said one reason that many CEOs don't take salary cuts during tough times is that overall compensation packages -- including stock options and bonuses -- are already tied to profits.

Another reason, she said, is executives tend to work hardest when business heads south.

``In good times, nobody questions a CEO salary. Now we are calling on executives to do one mean task and giving them a lot of responsibility to bring a company out of troubling times.

``They're working more than they ever had to in terms of righting the ship,'' she said.

Copyright © 2001 Reuters Limited.

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