Take the reduction in salary with grace. Then spend all your time looking for another job.

Without realizing it, your boss has just told you the company is going down the tubes. Instead of laying you off, he’s paying you 80% of your salary to spend most of your day looking for work. Instead of standing in a bread line, you’re making money. Nothing you do or don’t do is going to save the company. You just need to look out for number one, baby.

Quit without notice when you find a better gig. Your boss doesn’t deserve notice. Even if it kills the company, it was dying anyway.