CXOs taking pay cuts: How does it impact ‘Employees’ perspective towards Company and Leadership

The pandemic made the world see exceptional scenarios. Gig workers are almost recognized as full-time employees; companies are mulling and some are even implementing permanent work from home (WFH); and organizations are rolling out bold and radically inclusive policies for workforces around the world. But one thing remains distinctive: CXOs across sectors taking pay cuts.

Bob Chapek, CEO of Walt Disney took a 50 per cent cut in his salary, Brian Chesky of Airbnb took the graph to 100 per cent. In India, according to reports, Larsen and Toubro MD SN Subrahmanyan and JSW Steel Chairman Sajjan Jindal took the highest pay cut between 43 and 44 per cent.

But what is the overall idea behind this approach? And how do leaders reach this solution/resolution?

Experts say pay cuts can’t be thought of as first or an easy option. In the words of Sunitha Lal, CHRO, Ather Energy, organizations choose it after a lot of thought and as the last resort.

“It is a difficult decision, but in an unfortunate scenario, if it has to be done for a larger purpose, then it means two things. One, it’s a crisis, and two, no ordinary response will work,” Lal said.

She further said a lot of what makes good leaders is about ‘living’ decisions, values, culture and being in the front, being present and being vulnerable.

Highlighting that although a pay cut is better than mass lay-off, Samir Parikh, Founder, Naman HR, said it certainly dents the mood and morale in the organization. And the only way to restore full pay is by attaining desired productivity and performance standards, and that is possible only through a motivated workforce.

“When CXOs themselves take a pay cut, and in almost all cases they must take the highest percentage of pay cut amongst the entire workforce, management can set an example to influence others in the system. CXOs’ pay cut galvanizes the entire workforce for the unified goal of the organization’s survival,” Parikh said.

 

Lack of communication can damage the approach’s intent

CXOs taking pay cuts, experts believe, ideally should not negatively impact employees’ perspective and behaviour towards the company and leadership, but in some cases, it can if there is a lack of communication.

In hard times, Sahil Chopra, Founder and CEO, iCubesWire, said the leadership team needs to stand tall and communicate very well with the teams, and also in a high spirited tone. “The communication needs to be done at regular intervals,” he suggested.

Chopra feels the act should be done when required and also should be done genuinely. He said the leadership team should stand up and commit that while these cuts are necessary owing to the situation, “we stand committed and will return these salaries as the time comes and the situation is better, this will surely give the employees a sense of positivity.”

Also, Chopra highlighted that regular HR fun activities and recreation should happen so that their momentum isn’t lost.

However, Parikh, NamanHR, believes the challenge for CXOs is to remain self-motivated and demonstrate the same sense of business approach as has been otherwise.

“It is not the pay cut that could negatively impact employees’ behaviours towards the organization and its leadership, but the CXOs’ behaviours post-pay cut that can create a larger impact,” he added.

Lal, Ather Energy, propounded that leaders need to constantly update employees on how the leadership is handling the situation, steps taken and progress made. “This means that you have to be open and in the centre and front. Not hidden behind titles or cubicle solving,” she said, adding, “team members should know that the right steps are being taken to solve or sail through the crisis and they need to be informed regularly of it.”

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