Last spring, I wrote about initial reports of executive and director pay changes related to COVID-19. For another look at pay actions taken in response to the pandemic, an Equilar and Stanford study provides a more recent review of CEO and director pay actions taken by Russell 3000 companies. The study examined Form 8-K and proxy statement filings from companies for the period January 1 – June 30, 2020. As companies continue to struggle with challenges presented by the pandemic, the study found 17% of companies made adjustments to CEO salary, bonus or long-term incentive programs or director fees.
The study’s narrative includes representative examples of specific pay actions some companies took. So for those looking for a sample disclosure of certain pay actions, this could be one place to look. Some of the study’s other findings include:
– Industries most likely to make pay changes were retail, manufacturing and transportation – which the study says includes airline companies
– Vast majority of pay changes were to CEO salary or director fees
– For companies that made changes to annual bonus programs, most reduced current or previous-year bonus payments
– Companies that took pay action had a median stock price decline of slightly over 30% compared to companies that didn’t take pay actions, which only saw a median stock price decline of 18%
– Of the companies reducing CEO or director pay, 82% also implemented workforce reductions or reduced average employee pay
The authors noted surprise in that the pay actions appeared to have little relation to ESG ratings – finding that the median ESG rating of companies taking CEO/director pay actions was not significantly different from the median rating of companies that left pay unchanged
Lynn Jokela, CompensationStandards.com September 17, 2020
