The Advisors' Blog

– Lynn Jokela

Last week, Liz blogged about FW Cook’s analysis of compensation decisions from S&P 1500 companies with early fiscal year ends (April – June of this year).  This Compensation Advisory Partners’ memo provides another in-depth look at pay actions from companies with early fiscal year ends and in addition to the memo, the firm has a searchable Covid-related pay action tracker available on its website.  The memo cautions that it’s too early to say whether the actions by the early filers are indicative of trends we’ll see when most companies file their proxy statements in the spring, but it’s helpful to see generally what some companies have done.  Here’s some of the memo’s high-lights:

– From an industry-sector standpoint, the early filers show significant representation from Information Technology (28%), Industrials (15%) and Consumer Staples (15%).

– Of the 65 early filers, 43% announced changes to their outstanding and go-forward incentive plans because of Covid-19.

– Modifying the performance period was the most prevalent change for both annual and long-term incentive plans.  CAP predicts goal-setting will remain as a key challenge for incentive plan design for 2021 and beyond. The COVID-19 pandemic hurt many companies and helped others (e.g., consumer staples), resulting in highly unusual results for 2020. To address future uncertainty during goal-setting, breaking performance periods into smaller periods may become more common until economic conditions stabilize.

– Although only 4 of the 65 early filers provided special awards to executives, CAP expects to see more special awards in the future – examples of special awards include awards to replace annual and long-term incentives that weren’t paid because of Covid-19 and special grants to incentivize executive performance.