Employees Feel Heat as Companies Cut Salaries to Control Expenses

A growing number of companies are turning a chain saw on their cost structures, desperate to send a positive message about their stocks to Wall Street.

But that message probably isn’t making a lot of employees happy.

Discount brokerage Charles Schwab Corp. this week told employees that it will start the new year by slashing the salaries of its management team by up to 50%.

In a company memo, Schwab said it will temporarily reduce management salaries because the San Francisco-based company needs “to aggressively control expenses during this bear market.”

Schwab is grappling with a sharp drop-off in trading business. Although no official announcements have been made, the company has been sending out signals that its fourth-quarter earnings will likely be disappointing.

The company’s planned salary cuts will start at the top, with co-CEOs David Pottruck and Charles Schwab absorbing 50% salary decreases beginning Jan 1. and continuing until April.

The salaries of other senior managers will be trimmed by 10% to 20% in January and February. Junior officers will suffer a 5% salary reduction during the first two months of 2001.

The salary cuts will hit about 750 Schwab executives and managers.

The paychecks of more than 24,000 rank-and-file employees won’t be affected, but Schwab is encouraging all workers to take unpaid leaves of up to 20 days to help save the company money.

Schwab shares (ticker symbol: SCH) slipped 31 cents to $27.81 Thursday despite the news.

Last week, Microsoft told employees that it will get aggressive in cutting costs, though it also wants to raise some workers’ salaries to make up for what they’ve lost in stock options.

On Thursday, the San Jose Mercury News reported that Hewlett-Packard Co., the world’s No. 2 computer maker, plans a freeze on employees’ wages for at least three months to cut costs as sales slow.

HP Chief Executive Carly Fiorina this week sent a memo to employees announcing the measure, the paper said. The report cited two unidentified people familiar with the memo as saying the freeze would save $100 million to $140 million.

HP stock (HWP) slid $1.06 to $29.38 Thursday, a 52-week low.

Sun Microsystems also may ramp up cost-cutting, according to an internal memo obtained by Reuters. Sun CEO Scott McNealy told workers that “as the market sorts out its economic uncertainty, we will need to continue the cost controls we put in place this quarter.”

Sun shares (SUNW) fell 50 cents to $26.94, also a 52-week low.