New Yahoo CEO freezes employee salaries

With Carol Bartz just about a week into her new reign as the CEO of Yahoo, Inc. , she's already made one tough call – to implement an employee salary freeze.

The company is trying to harness its finances as it struggles for mind and market share while it faces Google Inc. and an increasingly bad economy.

“Based on the current economic environment and our focus on keeping costs in line with revenues, we have decided that providing annual salary increases would not be in the best interests of the company or our shareholders,” said Kim Rubey, a Yahoo spokesman in an email to Computerworld . “This decision is consistent with our broader focus on strategically reducing Yahoo's costs, an effort that has been underway for some time now.”

Industry analysts had said a week ago that Bartz, who is known in business circles as a tough businesswoman who is not afraid to speak her mind, would have some big, and not so easy, decisions to make soon after coming on board to lead online pioneer Yahoo .

Renny Ponvert, CEO of Management CV Inc., whose analysts track CEOs and top executives, said in a previous interview that one of the first things Bartz would need to focus on is improving employee morale. While a salary freeze may not fall in line with that goal, stabilizing the company just might.

“Yahoo [was] struggling even before the economic downturn,” said Allan Krans, a senior analyst with Technology Business Research, Inc. “As an early indication, [the salary freeze] says she's focusing on reducing costs. Coming in, people expected she'd have more operational discipline than [former CEO Jerry] Yang. It's like Obama going in and freezing salaries for senior staff. I think a lot of people at Yahoo have been expecting that for some time.”

Yahoo has been losing market share to Google in recent years, and Bartz is looking to figure out how the company can rebound in a market that has changed dramatically over the past several years.

Yahoo's salary freeze comes a day after Microsoft Corp. announced plans to cut 5,000 jobs amid falling profits. About 1,400 positions already were eliminated this week. The job cuts come as the company announced that fourth-quarter profits fell 11% to US$4.17 billion.

Also Thursday, Google reported that its fourth profit took a dive. CEO Eric Schmidt blamed the declining profits on one-time investment write-downs.