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WR Hambrecht caps salaries at $60,000

The online financial services company caps all employee salaries at $60,000, resulting in about 60 percent of its work force getting a pay cut.

In a cost-cutting move, WR Hambrecht has capped all employee salaries at $60,000, resulting in a cut in base pay for about 60 percent of employees, the company said Tuesday.

At the same time, the company plans to introduce a revenue sharing program to help compensate those affected by the cuts, a spokeswoman said.

The online financial services company said the move, which begins Oct. 1, is aimed at avoiding more layoffs. Two months ago, the San Francisco-based company cut 20 percent of its work force, or about 45 workers.

"The economic environment has not improved," said Sharon Smith, a WR Hambrecht spokeswoman. "Most people concur that we are in a recession, so we think that this is the best alternative."

WR Hambrecht, launched in February 1999, was among the first to sell IPO shares to consumers via an electronic, auction-based method. Hambrecht also co-founded Hambrecht & Quist, an investment banking company specializing in technology companies that was later bought by Chase.

The salary cuts include the privately held company's top management.

The economic slowdown has particularly stung technology and financial services companies, which have resorted to massive layoffs and closures. Other companies have crafted more creative cost-cutting strategies, asking employees to take unpaid leaves of absence, take every other Friday off, or take pay cuts. For example, Hewlett-Packard asked employees in July to use up their vacation days or take a 10 percent salary reduction.

But few companies have initiated an across-the-board salary cap similar to the one WR Hambrecht announced Monday in a staffwide meeting.

Smith said it's unclear what the effect will be on morale: If a manager is earning as much as or only marginally more than his or her direct reports, it could be an incentive to look for a new job. WR Hambrecht has been experiencing high turnover for months, especially since a round of layoffs in July.

But some human resource experts praised the unique plan for its fairness. Dee DiPietro, CEO of Advanced-HR, a Saratoga, Calif.-based online human resource and compensation consulting service, said the cuts put extra pressure on senior managers, who are likely taking the biggest salary cuts. To that extent, she said, middle managers might find the cuts more easy to digest than across-the-board percentage reductions.

"If you were making $75,000 a year and your pay got cut to $60,000 a year, would it feel better to know that your boss is making $60,000 a year too, or that your boss got cut from $200,000 to $175,000 a year?" DiPietro asked. "I think it may actually be an admirable way of doing it--at the very least, it's unique. Few companies would make the people at the top take such direct responsibility for what's happening."