Caterpillar to cut executive compensation sharply for economic uncertainty

Special Report:Global Financial Crisis

CHICAGO, Dec. 22 (Chinese media) -- Caterpillar Inc. is planning to cut executive compensation up to 50 percent in 2009 in response to the current economic downturn, the company announced on Monday.

Caterpillar said that citing the continued deterioration of conditions in many of the markets its customers serve and on-going uncertainty in credit and financial markets, it will take cost cutting steps including significant compensation reductions for executives in 2009 as well as other compensation reductions for management and support staff.

The company will also suspend merit pay increases for management and support employees and has instituted a hiring freeze. According to Caterpillar's arrangement, for 2009, executive compensation will decrease up to 50 percent, compensation for senior managers will be reduced 5 percent to 35 percent and other management and support staff will see a reduction of zero to 15 percent.

Caterpillar considered not to announce this decision until January, but "it's better to communicate these plans with our employees as we approach the completion of our 2009 planning process," said Caterpillar Chairman and Chief Executive Officer Jim Owens. "We also wanted to give employees interested in the voluntary separation plan time to consider this decision and discuss it with family over the holiday break."

Just four days ago, Caterpillar decided to lay off 814 production employees at its Mossville, Illinois engine assembly facility where the production volumes decreased significantly because of a decline in orders for on-highway truck engines.