The Advisors' Blog

– Lynn Jokela

Throughout 2020, we’ve posted various reports about executive pay changes in response to challenges resulting from the pandemic – here’s a blog from earlier this year about executive and director pay cuts.  Semler Brossy, in partnership with The Conference Board and ESGAUGE, recently posted a new database tracking tool regarding Covid-driven incentive changes across the Russell 3000.

The database is pretty slick – it lists companies and the date of its public filing disclosing the incentive change, denotes whether changes are for a modified go-forward plan or a modified in-flight plan, while allowing users to sort and filter the information.  Here are some initial key findings:

– 177 Russell 3000 companies announced structural changes to their in-flight and/or go-forward incentive plans

• 48% of the sample announced changes to their annual incentive plan only, about 30% announced changes to both the annual and long-term incentive plans, and about one-fifth – 21% – announced changes to the long-term incentive plan only

 

– Annual Incentive Plan Changes (in order of prevalence)

• Reduced the target and/or max payout opportunity
• Added new metrics (focused on liquidity or strategic measures in the context of the pandemic)
• Modified performance period
• Canceled/suspended the annual incentive plan
• Delayed goal-setting to later in the fiscal year (this practice may be more prevalent among companies that have not disclosed such actions)
• Added Committee discretion to determine payouts (we expect to see more use of discretion)
• Switched to equity from cash
• One-time special bonus
• Reset goals

 

– Long-Term Incentive Plan Changes (in order of prevalence)

• Granted special awards to one or more NEOs (with varying rationale)
• Cancelled/suspended plan
• Reduced target/max payout opportunity
• Modified PSU metrics
• Increased weight of time-based vehicles (i.e., RSUs or stock options)
• Modified PSU performance period
• Delayed goal-setting
• Modified outstanding PSU performance goals