Motorola co-CEOs Greg Brown and Dr Sanjay Jha have decided to reduce their base salaries by 25 per cent in 2009.
Brown will also voluntarily forgo any 2008 cash bonus earned under the Motorola incentive plan. Since Jha's employment contract provides for a guaranteed cash bonus for 2008, he has decided to forego an amount equal tp waht Brown is relinquishing, while the remainder will be taken in the form of restricted stock units.
These actions are expected to lead to cost savings in addition to the $800 million that previously announced on October 2008, when, in a major cost cutting drive, the company had announced axing 3,000 jobs from a global workforce of 66,000 that would reduce its costs by $800 million, while simultaneously putting on hold its plans of splitting the company.
Electronics giant Motorola said yesterday that many employees globally will not get salary increases from next year and that it was freezing pension plans as the company struggles to cut cost and remain competitive after posting a $397-million loss in the third quarter, even as it has been unable to introduce a new product to compete with other high-end handsets.
Co-CEOs Sanjay Jha and Greg Brown said that the sustained downturn in the global economy requires these "difficult but necessary steps."
The 45-year-old Jha, a 14-year Qualcomm veteran, was inducted in Motorola last August to run its ailing wireless-handset division as a prelude to the planned spin-off of the unit in mid-2009. (See: Motorola poaches Qualcomm CFO to head loss-making handset division)
As part of the overall cost reduction programme, Motorola is revising its employee compensation and benefit programmes across the company. From March 2009, to better align with industry norms, Motorola will permanently freeze its US pension plans, preserving vested benefits accrued by employees and retirees but eliminating future benefit accruals.
Motorola intends to continue to provide funding to meet its pension obligations to present and future retirees.
Motorola also will temporarily suspend all company matching contributions to the Motorola 401(k) Plan and while US employees are free to continue contributing to the plan, they will not receive matching contributions from Motorola.
The company also said that employees in many of the markets in which it operates will not receive a salary increase in 2009.
''The sustained downturn in the global economy requires that we take these difficult but necessary steps,'' said Brown and Jha, co-chief executive officers of Motorola. ''While serving our customers remains a top priority, we are equally focused on our cost structure, and we will continue to implement appropriate measures to conserve cash and reduce expenses.''