The Advisors' Blog

– Lynn Jokela

Last spring, I blogged about initial reports of Covid-19 related executive and director pay changes.  For another look at pay actions taken in response to Covid-19, 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