American Express to restore compensation cuts, citing economy
American Express Co., which in June repaid the $3.4 billion in government capital it got under the Troubled Asset Relief Program last year, is planning to restore some of the employee compensation cuts it made seven months ago.
From Bloomberg News:
Annual merit increases and contributions to retirement plans will resume in January, and a 10% salary cut for managers in the senior vice president ranks and above will be rescinded, according to a memo today from Chief Executive Officer Kenneth Chenault to employees.
The memo cited "a somewhat more positive outlook about economic conditions in the coming months." American Express will maintain cuts on expenses, including employee travel and entertainment, meetings, consulting and training.
"The challenges we face are far from over," Chenault said, pointing to "stubbornly high" unemployment, lower consumer spending and decreases in home prices. "Even after the recession ends, we are likely to see a prolonged period of slow economic growth."
Note that this is not about bonuses, which is the main battle over banker pay now raging worldwide. Still, one of the reasons why many financial companies have sought to repay TARP money is to get out from under restrictions that TARP rules placed on executive compensation in general.
Restoration of rank-and-file pay raises at AmEx and other companies would be a good thing for the economy, of course, giving workers more spending power.
A survey of 175 big companies by consulting firm Watson Wyatt last month found that 44% of firms that had reduced salaries in the recession planned to restore those cuts in the next six months.
Twenty-four percent of companies that reduced 401(k) match contributions expected to reinstate the matches in the next six months.