Most of the proxy statements I’m looking at these days include some level of disclosure about the coronavirus pandemic (and not just in the context of why the company has opted to hold a “virtual-only” annual meeting). I expect that this is going to be the norm for this proxy season. Some companies weave the disclosure throughout their CD&A, while others tackle the subject right up front before they go through their discussion and analysis.
Woodward, Inc. is an example of this latter approach. The company includes a section in the Executive Summary of the Compensation Discussion and Analysis portion of its recently filed definitive proxy statement that neatly summarizes how the crisis impacted its compensation programs:
In response to the economic challenges resulting from the COVID-19 pandemic, the Company engaged in several initiatives designed to mitigate the impact of the COVID-19 pandemic on the Company and to position the Company for longer-term growth while preserving our financial strength through this period of global uncertainty. On April 3, 2020, as part of the broader effort to address the near-term economic challenges brought on by the pandemic, the Compensation Committee approved an immediate reduction of Company officers’ salaries and its non-employee directors’ annual base retainers. Specifically, the CEO’s salary and non-employee directors’ annual base retainers were reduced by 25%, and all other officers’ salaries were reduced by 10%. In September 2020, the Compensation Committee reinstated the officers’ and non-employee directors’ full pay for fiscal year 2021.
Additionally, on April 3, 2020, the Compensation Committee proactively eliminated any payments under the WVIP [the “Woodward Variable Incentive Plan”) in fiscal year 2020 for all employees. Similarly, in September 2020, in the continued interest of maintaining cash and liquidity throughout the COVID-19 pandemic, the Compensation Committee determined that a WVIP payout in 2021 was unlikely and thus the Compensation Committee did not establish specific metrics and criteria under the WVIP for fiscal year 2021. The Compensation Committee did, however, renew the overarching annual performance incentive plan, which continues to specify performance goals related to net earnings similar to such goals as described below in Annual Short-Term Incentive Compensation.
In further response to the challenges resulting from the COVID-19 pandemic, the Company implemented workforce management actions through a combination of a hiring freeze, layoffs and furloughs, reduced work week hours, reduced all non-essential costs, implemented a Company-wide wage freeze, increased focus on reducing working capital, and limited capital expenditures to business-critical items.
Thereafter, as the company goes through the discussion and analysis of its direct compensation elements, it routinely refers back to this disclosure as appropriate. As we turn into the new year, I hope to be able to highlight some of the different disclosures that I see, as this year’s CD&As are going to be pretty unique given what we have gone through over the past 10 months.
-Mark Borges, CompensationStandards.com December 15, 2020
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