AU Optronics (AUO) has announced a pay-cut program for its top executives as part of its cost-reduction plan to cope with the prolonged slump in the LCD panel industry.

A total of 16 top executives will take a 15% cut of their monthly salaries, effectively immediately. AUO chairman KY Lee is also subject to the pay-cut program, but the reduction ratio for him is not known, according to a Chinese-language Commercial Times report.

Based on AUO's financial report, the 15% pay-cut will save NT$8.12 million (US$270,000) in personnel cost for the company in 2011.

AUO's move is likely to trigger a chain effect among local IT companies, according to industry watchers. However, peer company Chimei Innolux (CMI) has not yet implemented a pay-cut program.

The weak demand in the end market has caused AUO, CMI, and two other major panel makers - HannStar Display and Chunghwa Picture Tubes (CPT) - to incur total losses of NT$99.71 billion in the first three quarters of this year, according to data released by the companies.The losses include NT$44.45 billion posted by CMI, NT$40.59 billion by AUO, NT$9.07 billion by CPT and NT$5.6 billion by HannStar.

Meanwhile, HannStar has denied rumors that it has laid off 20% of staff at its module plant in Nanjing, China. HannStar indicated the employees are simply being transferred to another plant due to the transfer of production lines.