– Lynn Jokela
Not too long ago, I blogged about Meridian’s memo discussing the $1 CEO salary coupled with equity awards approach. As Frank Glassner from Veritas Executive Compensation Consultants noted said “this approach was first used by Lee Iacocca at Chrysler back in the 70s and during the current COVID-19 pandemic, significant caution and thoughtfulness should be called for, as the current grants would likely be made at all time lows. This of course can potentially create ‘space-shot’ realizable value and subsequent payouts as the economy eventually recovers.”
Amid the current economic turmoil, there seem to be daily reports about CEO and employee pay cuts. Now this MarketWatch opinion piece from two academics has another take on executive compensation – it suggests U.S. CEOs donate their 2020 salary and stock compensation to workers and cities and towns on the front lines fighting the coronavirus pandemic. The authors specifically call on members of the Business Roundtable – and others – to stand by their commitment to social responsibility.
Many companies have in fact stepped up – among others, Apple has introduced a digital screening site aimed at helping users determine whether they should be tested for the coronavirus and Google has pledged $800 million in a pandemic relief package. Comcast announced that it was setting aside $500 million for employee wages and benefits where their jobs have been impacted by the crisis. Comcast also said its CEO and other executives were donating 100% of their salaries for coronavirus relief efforts.
Other CEOs have also already given up their salary and/or bonus to help companies pay worker salaries, see these reports about Texas Roadhouse, Marriott and Yum Brands. Although the pay reductions don’t include stock compensation and there hasn’t been a broad statement by members of the Business Roundtable as the MarketWatch opinion piece seems to want, the increasing number of companies announcing CEO pay cuts and/or donations shows companies are listening and aware of optics. With the economic effects from the pandemic far from over, this likely isn’t the last call for help.