Re/insurance broker Aon, which is in the process of merging with Willis Towers Watson, has imposed a 20 percent salary cut on almost three quarter of its staff in an attempt to help business navigate through the COVID-19 induced economic crisis.
Chief executive Greg Case, who himself has agreed to take a 50 percent salary cut, stated that he is "taking a more complex and difficult" approach to protect the firm during this challenging period, adding that the “wait and see approach” would have put the future of the firm at risk. He also confirmed that its $30 billion merger deal with WTW will continue as planned.
In addition to Case, senior management including Christa Davies, Eric Andersen, John Bruno and Tony Goland, as well as board of directors, will also see their pay reduced by 50 percent.
Nearly 70 percent of its staff will see their salaries cut by approximately 20 percent, while the remaining 30 percent will see no reduction.
Case said that in collaboration with local country leaders, the Aon Operating Committee has developed a "tailored approach" based on a set of criteria including the cost-of-living, to determine the most equitable way to apply a temporary salary reduction. These actions will begin to take effect May 1.
Additionally, the company has "substantially curtailed" spending on contractors and third-party vendors and has instructed Aon Business Services team to take additional steps. The efforts are aimed at reducing all discretionary expenses not related to client service.
Case confirmed that the company has also paused its stock buyback plan and set aside those funds, as it intends to preserve its dividend.
Case, however, highlighted that its business combination with Willis Towers Watson will be a "positive catalyst that enables us to accelerate innovation". "This all-stock combination requires no financing and our intent to complete it creates no incremental financial burden," he said in a letter to Aon's staff.
"Our cash position is strong, reinforced by an investment-grade balance sheet and a thoughtfully managed and staggered debt portfolio, which insulates us from the accumulation of debt maturities at any one time," Case commented.
"Our objective is that everyone emerges from this challenging period in as good a place as possible; unfortunately, it is too early in this economic crisis to determine how we ultimately mitigate these actions."
He concluded: "Our commitment is that we will act with integrity to protect our colleagues and our firm. We will continue to apply our principles-based approach to how we manage through this crisis and review these actions monthly."
Aon, Willis Towers Watson, COVID-19, Greg Case