Business World

Vowing a new wave of meritocracy and tighter links between pay and performance, Anheuser-Busch plans to give high-performing salaried staffers bigger rewards while reducing contributions to the health care and pensions of salaried retirees.

The brewer outlined the changes Wednesday in a memo to salaried employees from James Brickey, A-B’s vice president of people. The sweeping changes are the latest in a series of shake-ups at the top U.S. brewer in the five months since InBev bought the St. Louis company.

More than half of Anheuser-Busch’s 4,400 St. Louis-area employees may be affected by the changes; unionized employees are not affected.

A-B plans to push more of the cost of retiree health care onto the retirees themselves, who will have to pick up more of the costs of doctor visits and treatments.

Salaried retirees under age 65 will have to pick up 50 percent of the health care cost-sharing next year and 60 percent in 2011. They are responsible for 40 percent today. For retirees age 65 and older, the cost-sharing will rise every year until 2015. That’s when the company-provided supplement to Medicare will be phased out completely.

InBev’s culture is moving into the halls of Anheuser-Busch, and the changes have been swift. Offices have been demolished to make way for conference rooms and open desks. Storied advertising agencies have been dropped as A-B tightens its roster. After several rounds of layoffs and retirements, remaining employees are trying to make do with fewer personnel. "Accountability" is a hot word. Observers say shareholders’ interests — not necessarily those of employees — are the driving forces now at Anheuser-Busch.

Explaining the changes to its compensation system, Anheuser-Busch appealed to a jury of its peers — large U.S. companies of comparable size — many of whom want to get out of the business of supplying retirees’ health care.

Fewer than half of all companies of A-B’s size in the United States offer any type of retiree health care, according to data from Mercer, a human resources consulting group. Even among companies that offer health care coverage, the retirees have to shoulder a "substantially higher" portion of the cost than do Anheuser-Busch retirees, Brickey wrote in the memo instant credit report.

The company said it planned to pay its salaried employees between 80 percent and 100 percent of each position’s "market rate," a median figure for comparable jobs. In the past, Brickey wrote, high performers "might have seen fewer rewards as dollars were spread more evenly among all employees."

In the new regime, before a salaried employee is allowed to have base pay above the industry average, "special justification and approvals" will have to be made. Put another way: The base pay of nearly all salaried workers at Anheuser-Busch will be below the national median for their respective jobs. How does that fit with A-B’s stated goal of rewarding top performers? Answer: Employees are being told that extra pay is available for high performers — but in the form of bonuses and special awards, not base pay.

"The focus on cutting costs and making it completely a performance-based company is absolutely how InBev was being run," said Morningstar analyst Ann Gilpin. "And now, it’s at Anheuser-Busch. You could be 60 years old with tons of experience at InBev, and if you don’t perform, you don’t get paid and you don’t get promoted."

Gilpin predicted that this will be part of a string of cutbacks as Anheuser-Busch’s culture gets transformed into one in which recent performance is valued above experience.

The company noted that almost everyone had more responsibilities because of hundreds of recent retirements and layoffs. Employees who took on the most added work will be given more consideration for this month’s annual increase in base pay. About 40 percent of salaried employees will get those raises. Previously, just about everybody got them.

Meanwhile, Anheuser-Busch wants to bring its retirement plans — both pensions and 401(k) plans — "more in line with other businesses and with our global company," Brickey wrote. Contributions to the pension plan will be frozen on Jan. 1, 2012. Benefits from A-B’s retirement plans will fall to the 50th percentile of the U.S. market.

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