The Advisors' Blog

– Liz Dunshee

Compensation Advisory Partners recently analyzed COVID-related pay actions of 300 companies in the S&P 1500 with a December 31st FYE. Although it’s a somewhat small sample size, it was pretty surprising to see that 50 percent of the companies made COVID-related changes – mostly, modifications to existing annual incentive payouts or go-forward annual incentive plans. Changes were more common among smaller & mid-sized companies than large caps. Here’s a few other takeaways:

– 50 percent of S&P Composite 1500 companies with fiscal year ends (FYEs) near December 31 modified their outstanding and/or go-forward incentive plans due to COVID-19, up from 42 percent of September FYE companies.

– Of the companies that made incentive changes, 60 percent made annual incentive changes, 9 percent made long-term incentive changes, and 31 percent changed both incentive plans.

– Of companies that disclosed incentive plan changes, they were typically for the most recently completed or outstanding performance period(s) vs. prospective changes.

– Consistent with September FYE companies, modifications were more likely to be to the annual incentive plan among December FYE companies.

– Most September and December FYE companies that adjusted annual incentive payouts for the impact of COVID-19 relied on compensation committee discretion – either positive or negative. CAP’s analysis of the December FYE companies shows that Mid Cap and Small Cap companies were more likely to exercise discretion than their larger S&P 500 peers.

– The most prevalent annual incentive actions were 1) exercising or adding discretion to the plan, 2) adding or changing the performance measures, and 3) revising the payout scale.

– The most prevalent long-term incentive actions were 1) adding or changing the performance measures, 2) modifying the performance period, and 3) changing the long-term incentive vehicle mix.