Top Westinghouse Executive’s Salary Cut by $1 Million : Compensation: Directors link future pay to performance. The firm lost $1 billion in 1991.

Westinghouse Corp., in one of the most dramatic steps to date to reduce top executives’ pay, slashed its chairman’s compensation by $1 million in 1991, according to the company’s newly released proxy statement.

Directors of financially ailing Westinghouse cut Paul E. Lego’s pay to $677,083 from the $1.68 million he earned in 1990. But Lego was given a number of financial incentives to improve Westinghouse’s performance.

Pittsburgh-based Westinghouse laid off about 4,000 workers in 1991, after a $1.5-billion quarterly loss spurred by a souring investment portfolio. The company lost $1.09 billion for all of 1991, versus a $268-million profit in 1990.

“This is a very significant occurrence,” said Robin A. Ferracone, senior vice president of Strategic Compensation Associates, a Los Angeles consulting firm.

Executive compensation has become a highly charged issue as the U.S. economy struggles to recover from recession and many companies have reported staggering losses and layoffs. The Securities and Exchange Commission recently issued proposals that could ultimately give shareholders a larger voice in determining pay levels for top executives.

Increasingly, companies are implementing programs that more closely tie executive compensation to financial performance so that pay rises when times are good but can fall when times are bad.

Although Ferracone expects many executives to take pay cuts for their 1991 performance, the magnitude of Westinghouse’s salary slashing is far beyond the norm.

The only comparable action that has surfaced to date was an announcement by International Business Machines that its chief executive, John F. Akers, would take a 40% compensation cut, reducing his salary and bonus below $1.6 million.

Among Lego’s new incentives is $1.1 million for meeting unspecified goals during a three-year period ending in 1993. The goals will be measured by increases in return on equity, earnings per share and stock price, Westinghouse compensation director Ed Goff told the Associated Press.

“On a total compensation basis, Mr. Lego has taken what you would call a significant hit for the performance of 1991,” Goff said.

Other Westinghouse executives also took pay cuts, according to the proxy. As a group, the company’s top 14 officials received nearly $4 million in 1991. In 1990, the top 16 executives received a total of $10.8 million.

The highest-paid among that group was Leo Yochum, the company’s former chief financial officer, who was called out of retirement to take over at troubled Westinghouse Financial Services. Yochum received “an initial fee of $800,000” after returning to Westinghouse, the proxy said.

According to current proxy statements, some California companies, including GlenFed Inc., Martin Lawrence Limited Editions and Televideo Systems Inc., also have revealed that their top managers would take pay cuts.

Ferracone expects that at least half of the firms that have posted declining earnings and revenues during 1991 will also record declining compensation for their executives.

“The spotlight is shining very brightly on companies this year,” Ferracone said. “Managements and boards are feeling a lot of pressure and I think that will make a difference.”

Still, million-dollar pay cuts will remain rare, she said. Typically, companies will force their top executives to accept cuts in the neighborhood of about 10%, she predicted.

The Associated Press contributed to this story.