A slate of recent press articles has highlighted the overall state of CEO pay during the pandemic as well as criticizing specific pay packages at companies that saw severe financial impacts in 2020. As in other periods of economic uncertainty, executive pay has become an immediate target for a variety of stakeholders including the press:
- The Wall Street Journal published its annual review of executive compensation in 2020, looking at filings from the 300 largest US companies. The article highlights that median pay increased from $12.8 million in 2019 to $13.7 million in 2020, despite salary cuts taken by CEOs. The article is critical of adjustments to executive compensation in the pandemic, or to those that provided special equity awards. However, it did not mention that some CEOs may have seen increased compensation due to the timing of equity grants made through company’s standard procedures. Equity grants made in March or April would have rapidly increased in value as markets recovered.
- Macy’s has come under scrutiny after CEO Jeff Gennette’s disclosed compensation increased 7.5% despite a salary cut starting April 1. Sales declined 30% year-over-year and the company posted a $4.5 billion operating loss and significant staff cuts. That said, Mr. Gennette’s equity awards for the 2018-2020 period did not pay out and 50% of his 2020 equity grants (valued at $7.0 million) are tied to relative TSR versus the S&P Retail Select Index.
- Norwegian Cruise Lines, along with the entire travel and tourism industry, fared badly in the pandemic. Revenue declined 80% and the company recorded a $4 billion loss. However, CEO Frank Del Rio’s compensation doubled to $36.4 million. That increase was driven by bonuses provided for a three-year contract extension. It also included a $10.3 million payout on the previous contract which was effectively what he would have received in severance. The company stated that due this payout, Mr. Del Rio will not be entitled to any severance benefits going forward outside of the prorated value of his annual bonus.
So far, shareholders have expressed higher than normal levels of dissatisfaction with executive pay. According to the Journal, about 1 in 6 companies holding a shareholder vote since September have received less than 70% support (as opposed to 1 in 12 one year earlier).
