Pay cut or job cut?

April 13, 2001: 9:00 a.m. ET

Acxiom employees endure salary cut and stock options to avoid pink slips
By Elizabeth Hurt

NEW YORK (CNNfn) - Desperate times call for creative measures. As companies struggle to come to grips with the economic downturn, layoffs are starting to seem inevitable, especially in the high-tech sector. But Acxiom Chairman Charles Morgan decided last week that he wasn't ready to give in yet.

So Morgan and his team came up with a scheme that would require 5,000 of the Little Rock, Ark.-based data-management company's employees to endure a 5-percent salary cut. In return, the workers would be given stock options, and given the choice of taking up to an additional 15-percent pay cut for more options.

"We have actually communicated our intentions that within a year, assuming the economy will rebound, they get their salaries back," said Cindy Childers, Acxiom's organizational development leader.

Workers -- actually termed "associates" according to the company's official lingo -- were given about a week to decide how they wanted to proceed. To help employees with the decision, Acxiom (ACXM: Research, Estimates) has provided them with a Web-based tool that will let them calculate how their choices might impact their take-home pay. The decisions will be finalized Wednesday, but so far Morgan says he hasn't lost any employees.

"I'm not suggesting that 100 percent of (the) people are happy with it, but the number of people unhappy was amazingly small," said Morgan.

Morgan says he has tried the layoff route as opposed to cutting expenses before, and it didn't seem like a good way to go.

"We've gone through some good times and bad times," said Morgan. "We had bad times in 1991. At that time we did a 7 percent layoff. This time, I just felt like this program would most likely be well-received by Acxiom associates. But we didn't just spring this on everybody without doing research and homework."

While Acxiom is one of the first companies known to offer stock options in exchange for pay cuts, layoff alternatives may be catching on.

Last week, Agilent Technologies (A: Research, Estimates) announced a temporary 10-percent pay cut for employees in order to reduce expenses.

"We're trying to avoid across-the-board layoffs in response to cyclical market conditions," said Agilent CEO Ned Barnholt, in a statement regarding the decision. "We view the economic slowdown as a business cycle -- even though it's deepening and broadening. At the present time, we believe this pay reduction is the most appropriate action for us. We value our work force and need to be ready to meet demand as business conditions improve."