After rising unchecked for years, CEO pay may be headed for a fall.

Compensation experts say the severe downturn, a shift in the political winds and shareholder outrage could finally combine to pressure companies to limit raises or, in some cases, even cut executive salaries.

That has occurred a few times already. Last month, Motorola Inc., facing drastic cost cuts, announced that its co-CEOs, Gregory Brown and Sanjay Jha, had agreed to take 25 percent reductions in 2009 salary. Caterpillar Inc. recently said its executives, including CEO Jim Owens, could see their total compensation decline by as much as 50 percent next year because of cuts in incentive pay. Both companies cut rank-and-file compensation as well.

Given the number of Chicago companies facing a similarly bleak 2009, more CEOs may be forgoing raises.

“There are other public companies in Chicago where there aren’t going to be executive salary increases in 2009,” said Andy Goldstein, who heads consulting firm Watson Wyatt Worldwide’s executive compensation practice in Chicago.

Goldstein declined to name the companies before they file proxy statements in the spring.

Reducing executive pay has a minor impact on profits, but it helps companies avoid the perception that CEOs don’t suffer along with employees and shareholders.

“It helps morale of the companies in the long run,” said Mark Reilly, a partner at Chicago-based 3C-Compensation Consulting Consortium.

Reilly estimates that about one-third of companies will reduce pay—whether it’s bonuses, salaries or stock—next year. The most meaningful cut, he says, is in cash compensation.

It’s anybody’s guess who might join executives at Motorola and Caterpillar in having their wallets lightened. Candidates could include UAL Corp. CEO Glenn Tilton and Boeing Co. chief James McNerney.

Both companies face job cuts, and both men rank among the highest-paid CEOs in Chicago. United Airlines pilots, who are facing the loss of 950 jobs, have called for the ouster of Tilton and say he should at least take a pay cut.

A UAL spokeswoman said the company’s executive pay “is market-based and on par with other comparably sized companies.”

A Boeing spokesman declined to comment.

United and Boeing have been the targets of shareholder activists pushing for greater input on executive pay. Now those activists are finding support among large investors, even mutual funds, long acquiescent on compensation issues.

“When they’re not making money, they don’t see why anyone else should, either,” said Paul Hodgson, senior researcher at the Corporate Library, a Maine-based firm that advises institutions on pay and governance matters.

Last year, United and Boeing shareholders voted down proposals that would have given them a yes-or-no vote annually on executive pay packages. Motorola stockholders approved a similar proposal.

This year, compensation experts expect changes in federal law to impose so-called “say on pay” measures universally. The legislation likely will be introduced in the House early this year, two years after Congress last voted it down. The sponsor of the failed 2007 bill: then-Sen. Barack Obama.

Filed by John Pletz of Crain’s Chicago Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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