Throughout 2020, we’ve posted various reports about executive pay changes in response to challenges resulting from the pandemic. Semler Brossy, in partnership with The Conference Board and ESGAUGE, recently posted a new database tracking tool regarding COVID-driven incentive changes across the Russell 3000.
The database is pretty slick — it lists companies and the date of its public filing disclosing the incentive change, denotes whether changes are for a modified go-forward plan or a modified in-flight plan, while allowing users to sort and filter the information. Here are some initial key findings:
– 177 Russell 3000 companies announced structural changes to their in-flight and/or go-forward incentive plans
- 48% of the sample announced changes to their annual incentive plan only, about 30% announced changes to both the annual and long-term incentive plans, and about one-fifth – 21% – announced changes to the long-term incentive plan only
– Annual Incentive Plan Changes (in order of prevalence)
- Reduced the target and/or max payout opportunity
- Added new metrics (focused on liquidity or strategic measures in the context of the pandemic)
- Modified performance period
- Canceled/suspended the annual incentive plan
- Delayed goal-setting to later in the fiscal year (this practice may be more prevalent among companies that have not disclosed such actions)
- Added Committee discretion to determine payouts (we expect to see more use of discretion)
- Switched to equity from cash
- One-time special bonus
- Reset goals
– Long-Term Incentive Plan Changes (in order of prevalence)
- Granted special awards to one or more NEOs (with varying rationale)
- Cancelled/suspended plan
- Reduced target/max payout opportunity
- Modified PSU metrics
- Increased weight of time-based vehicles (i.e., RSUs or stock options)
- Modified PSU performance period
- Delayed goal-setting
- Modified outstanding PSU performance goals
-Lynn Jokela, CompensationStandards.com October 28, 2020
