FishbowlDC has learned that CQ has instituted a salary freeze for 2009. CQ CEO Bob Merry convened all employees Friday to discuss the freeze and explained it as a hedge against the downside risks of the looming recession.

One source tells FishbowlDC that most attendees accepted his explanation that CQ "fundamentals are strong" based on the subscription-based revenues, expanding web products, and the overall increasing market demand. Even advertising revenues were still expected to rise next year, but those expectations were tamped down, forcing the salary freeze move, according to Merry.

Bonuses, hiring, and unspecified "acquisitions" are still slated to progress as anticipated.

Merry's full staff memo after the jump...

MEMORANDUM / October 23, 2008

To: All CQ/Governing Employees
From: RWM
Re: 2009 Budget

I wish to inform you that, as we complete our budget planning for 2009, I am initiating an austerity plan on the expense side that will affect all of us. I wish also to explain what this will amount to and why I believe it is necessary.

I first began covering U.S. economic policy 28 years ago, and I have been following this subject very closely since then. My reading of the economy at this crucial juncture tells me we are heading into a global recession that will be relatively long and relatively deep. I will not be surprised if unemployment reaches 9 percent or if we find ourselves in negative growth numbers for up to a year or more. If such a recession should materialize, with all of its implications for businesses throughout our country, it isn't conceivable that we would be spared from a serious revenue decline.

As the steward of our company, I have a deep responsibility to ensure that we never allow our revenue to plunge below our expense base. I know what this is like, and some of you remember as well when the advent of the web wiped out some $2.5 million in CQ online revenue. We got caught behind the curve, unmindful of the implications the web would have on our business. And we paid a heavy price for that. It took us years to get out from under that situation by building CQ.com, revising our print strategies, bolstering our advertising program, and investing successfully in our future. The result has been annual growth rates of 15 percent over the past three years. Our company is now very strong and vibrant.

But if we fall behind the curve of the coming recession and find ourselves in a loss position, all of our recent gains will be wiped out and we will be forced into the kinds of actions that such circumstances necessitate – layoffs, indiscriminate slashing, etc. Having watched as we missed the implications of the coming web, I do not want us to miss the implications of the coming recession. And I believe we all have a responsibility to ensure that that doesn’t happen.

Accordingly, I am working with Keith White, Neil Maslansky and others to reduce CQ's projected revenues in 2009 by a very large seven-figure number, which I believe is necessary to ensure we don't fall behind the curve of the looming economic downturn. This of course requires that I also reduce our budgeted expense number by a similar amount on the conviction that our expense base must be consonant with our anticipated revenue. Thus we will have to move into a phase of expense austerity beyond what we have seen in our recent years of robust revenue growth.

In assessing how we might accomplish our expense imperative, I came to the unavoidable conclusion that it can't be done without all of us having our pay frozen for the 2009 year. Thus I am not budgeting for salary increases next year. This decision is extremely painful for me, and the pain isn't leavened by the fact that our colleagues in St. Petersburg already have faced the same decision. I wish I could fortify us against the forces of economic turmoil next year without doing this, but I don't see how that is possible.

What happens if the economy doesn't turn down as I expect or if it doesn't affect us as I anticipate? Then I will seek to address that in some appropriate way by giving employees a chance to share in the upside. But I must emphasize that I cannot make any commitments on this without first grappling with all exigencies that may arise.

I know this cannot be welcome news among CQ employees, and therefore I am not comfortable simply transmitting it to you via this email. It seems to me that something of this nature should be dealt with through the kinds of face-to-face conversations we have with each other from time to time. Therefore, I have reserved the ballroom at the Westin Embassy Row Hotel, 2100 Massachusetts Avenue, for 11 a.m. tomorrow (Friday). I will be there to elaborate on my 2009 fiscal policy and to receive from you any questions and expressions you may wish to direct to me.

In the meantime, it is important that I convey to you that this doesn't represent any kind of downward spiral for our company of the kind seen lately, for example, in the newspaper business. We will continue to invest in our future through such initiatives as the FutureCom project, CQPolitics.com, the new Governing strategies, and two pending acquisitions. Our company is well positioned to thrive and grow once we get through the economic dislocations on the horizon. In fact, once we get through those we will be stronger than ever.

I thank you for all you have done to drive our company toward its destiny of ever greater prosperity, growth and positive impact in our community and market.

Best regards, rwm