Now Hear This!

Motorola Inc is cutting costs again, but this time it's doing so without laying off. 

The once-top cell phone maker today announced changes to employee compensation and benefit programs, as well as changes to executive compensation, that will take shape next year.

The cost-reduction actions come in addition to the $800 million savings plan Moto announced in late October. That plan calls for a delayed spinout of Moto's loss-inducing mobile devices business, formally announced in March, and some 3,000 job cuts.  Those layoffs will put Moto's total headcount cut at more than 13,000 for the year. Motorola employed 66,000 employees in 2007.

First, the cuts to employees: Today's cost-reduction action will first see Moto temporarily suspend all company matching contributions to its 401(k) Plan, effective January 1, 2009. US employees may continue to contribute to the 401(k) plan, but will not receive matching contributions from the company.

Then, come March 1, 2009, Moto will permanently freeze its US pension plans. Saying the effort is "to better align with industry norms," the company will preserve vested benefits accrued by employees and retirees, but will eliminate future benefit accruals.

Moto has also implemented a salary freeze for its employees.

Are the employee benefit reductions out of line? While the cuts may be out of the ordinary for tech companies, which in recent years have relied on benefits and salary to woo top talent, step out of the tech sector and you'll find that few US companies have pensions anymore and that many don't contribute to 401 (k)s.

Yet, while its great that Moto's is attempting to avoid further diminishing its talent pool with another round of layoffs, the benefit reductions and salary freeze can't be good for morale. Moto is now a company with significantly less headcount and, from what I hear from its employees, overburdened workers, who are doing their work, plus the work of their laid-off ex-coworkers, and who will now see less compensation come the new year.

On the executive end, Moto's co-CEOs, Greg Brown and Sanjay Jha, will voluntarily take a 25% decrease in base salary in 2009. Moto further said that Brown will voluntarily forgo any 2008 cash bonus earned under the Motorola incentive plan. While Jha’s employment contract -- inked just this August when the exec moved to Moto from Qualcomm --  provides for a guaranteed cash bonus for 2008, his bonus will also be voluntarily reduced by an amount equal to Brown’s forfeited bonus and the remainder will be taken in the form of restricted stock units.

In this blog's last entry, the matter of cutting executive salaries came up in the comment field with mixed reaction to such moves. Normally, I'd write that any company so deep in the hole as Moto is should see its C-level execs put in stocks in the company's lobby for employees to riddle and pummel with rotten fruit, but Brown and Jha are new to their CEO roles.

Although with Moto since 2003, Brown moved to his CEO post in January after Ed Zander left, and Jha, as stated above, came to the company in August, just before the financial crisis began to impact US companies. Not to defend the company's standing, but the fact is neither exec has had substantial time or a solid enough economic environment as a CEO to bring Moto back to its former grandeur.

What do you think? How do you feel about such cuts to employee benefits? Are they better than layoffs or is it just another was to abuse a workforce? And what do you think about the CEO-level pay cuts? Voice your opinion below.