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Estée Lauder Family, CEO to Take Pay Cuts as Coronavirus Affects Business

"We are also taking actions to optimize our cost structure, in light of ongoing temporary store closures in many regions," said chief executive officer Fabrizio Freda in a statement.

Several levels of employees at The Estée Lauder Cos. Inc. — including chief executive officer Fabrizio Freda and chairman emeritus Leonard Lauder — are taking pay cuts as the beauty business looks to navigate through the coronavirus pandemic.

“As COVID-19 has expanded globally in recent weeks, we remain first and foremost focused on the health and well-being of our employees. As a company, we are continuing to find meaningful ways to lend our support as the world fights this health crisis,” said Freda in a statement. “We are also taking actions to optimize our cost structure, in light of ongoing temporary store closures in many regions, and to enhance our liquidity during this unprecedented time.”

Lauder plans to reduce pay between May 1 and Oct. 31 for several levels of workers, news that circulated internally via a Tuesday night memo. Executive chairman William Lauder and president and ceo Freda will have base salaries cut by 50 percent, landing Lauder at $750,000 and Freda at $1 million.

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Lauder’s executive leadership team will take a pay cut of 30 percent; senior vice president-level employees will see a pay cut of 20 percent, and directors to vice presidents will have their pay cut by 10 percent.

Lauder’s board will also see reduced pay through November — Leonard Lauder and Clinique chairman Ronald Lauder “will receive a nearly 100 percent reduction in salary,” per the statement.

Store workers can also expect changes. “Regional decisions are being made for point-of-sale and field employees in locations where retail operations are closed or experiencing slow recovery, which will include unpaid temporary leaves of absence that allow employees to maintain health care benefits and access to COVID-19 support where permissible,” Lauder said in a statement.

The company is taking “cost-control measures” including optimizing advertising and promotional spending, restricting business travel and ceasing nonessential hires and certain professional services. The business has secured additional liquidity, and issued $700 million in notes this week, plus drew down the full amount under its $1.5 billion revolving credit facility.

Lauder is reallocating budgets for capital investment to support areas of business recovery, like China and online, which are both bright spots. Stock repurchase plans are temporarily suspended, as are cash dividends for the next quarter.

Merit based pay increases for fiscal 2021 are on hold, as is most hiring through January 2021.

“While in our company’s history we have enjoyed many successes and overcome numerous obstacles, the current health crisis is unlike anything we have faced before in terms of scope and impact. Globally, in most locations, our office employees continue to work from home, stores remain closed, and two of our manufacturing sites have temporarily stopped producing our products,” the internal memo read. “In some areas and markets, however, we are starting to see momentum. Online, for example, has experienced accelerated growth, but more time will be needed for our brick and mortar and travel retail operations to recover their momentum.”

As the COVID-19 pandemic continues to affect people and businesses, several beauty companies have asked employees to take pay cuts or taken other means to shore up financial liquidity. Many companies — including Lauder — have also stepped up philanthropic initiatives, like making hand sanitizer for health-care workers. Lauder has made a series of donations, including $2 million to Doctors Without Borders, as well as a grant to the NYC COVID-19 Response & Impact Fund, and donations to health care organizations in China. Clinique and MAC have also made donations related to COVID-19 relief.

In light of COVID-19 business impacts, Lauder withdrew financial guidance in March.

For more, see: 

Estée Lauder Joins Hand Sanitizer Manufacturing Movement

Coty Cuts Executive Salaries by 25%, as Coronavirus Impacts Business

Can Beauty E-commerce Sales Make Up for Store Closures?

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