New York — When the COVID-19 hit the world last year, the CEO’s high payroll package appeared to be as threatened as everything else.
Fortunately for these CEOs, many boards were willing to see the pandemic as an extraordinary event beyond their control. Boards across the country have made changes to the complex formulas that determine CEO salaries and other moves that have helped to offset the losses caused by the crisis.
As a result, the salary package of the CEO of the largest company last year went up even further, even though the pandemic led the economy to the worst quarter ever and reduced corporate profits around the world. The median salary package for CEOs of S & P 500 companies reached $ 12.7 million in 2020, according to data analyzed by. Equivalent For Associated Press. This means that half of the CEOs who participated in the survey increased production and half decreased. This is 5% higher than the average salary of the same CEO group in 2019, accelerating from a 4.1% increase in last year’s survey.
Advance Auto Parts could hurt CEO Tom Greco’s 2020 salary due to the tongue-in-cheek costs associated with pandemics. Injury and illness allowance extensions and expenses for hand sanitizers and other safety devices totaled $ 60 million, dragged by two key measurements that helped set his performance rewards. However, the Board’s Compensation Committee considered these costs unusual and unexpected and excluded them from the calculation. As a result, Greco’s total compensation increased 4.7% last year to $ 8.1 million.
At the carnival, the cruise company gave executives a share grant, partly to encourage leaders to stick to the company as the pandemic stopped operating the ship and forced them to take a temporary leave. .. For CEO Arnold Donald’s 2020 compensation, these grants were valued at $ 5.2 million, but ultimately, what the company will do to reduce carbon and other measures over the next few years. This allows Donald to receive $ 13.3 million worth of compensation annually, even though the carnival has increased its fiscal year’s losses to $ 10.2 billion. I did.
On the other hand, regular workers also showed an increase, but not as much as their bosses. And millions of people have lost their jobs.
Wages and benefits for all non-government workers rose by only 2.6% last year. This is due to US government data ignoring the impact of worker movement between different industries. This is an important difference, as more low-wage workers have lost their jobs due to the economic closure than professionals who can work from home.
“This year must have been a sacrificial year,” said Sara Anderson, who heads the World Economic Project at the Policy Research Institute on the left. “Instead, it was the frontline employees who paid the price, and it’s been a year of protecting the CEO from risk.”
The AP Compensation Survey included salary data for the CEO of an S & P 500 company that filed a power of attorney between January 1st and April 30th. Meet that standard. The CEO’s salary may include grants of shares and options that you will not ultimately receive unless you meet certain performance goals.
Complexity and coronavirus
The 5% increase in median salaries for CEOs last year masks the underlying salary fluctuations. Some companies prospered as a direct result of the pandemic. Lowe’s sales grew nationwide and grew rapidly, with CEO Marvin Ellison’s salary almost doubling after the S & P 500’s share price more than doubled throughout the fiscal year.
Meanwhile, other CEOs saw a reduction in compensation. At Duke Energy, the board lowered CEO Lynn Good’s short-term performance salary after earnings per share fell below initial targets. Good’s salary fell 2.6% to $ 14.3 million, but revenue was within Wall Street’s expectations earlier this year. Due to the pandemic, Duke did not adjust the formula to raise Good’s salary.
Overall, 61% of the 342 CEOs who participated in this year’s survey raised their compensation last year. That’s about the same as 62% in 2019, when economic and corporate profits were growing.
It’s also despite some of the CEOs who got a lot of attention cut their salaries that year, both as a shared sacrifice and to save a little cash for the company. This year. In the survey, about one in five CEOs had lower salaries in 2020 than in the previous year.
However, salary is often only a small part of the CEO’s total compensation, which is derived from the infamous and complex formula. Each year, companies embed charts and footnotes on their proxy page to show how the majority of the CEO’s salary increases or decreases depending on corporate performance. It’s a subtle area where many companies have finally adjusted the means by which CEOs can get more rewards.
Boards usually stick to formulas that set CEO compensation early each year, but the sudden collapse of the global economy has forced them to rethink. What made things even cloudier was that there were few historical guides on how they should proceed.
“Many committees have asked this very question. Is this comparable to the financial crisis? What did people do at that time?” From Compensation Advisory Partners, a consulting firm that works with the board of directors. Partner Melissa Burek said:
However, the pandemic was very different from the 2008 economic collapse. This is mainly because the crisis was caused by a virus and the CEO took a lot of debt and risk. As it became more difficult for boards to adjust their goals and get CEO incentive compensation, many boards also limited the amount of payments they could make.
“If the unemployment rate is very high, I think you have the following perceptions: Are you happy with paying the CEO at this level?” Kelly Malafis, a partner at Compensation Advisory Partners, said on the board. The idea of the association is stated as follows. “The answer is,” I’m doing this for performance. I don’t pay if I’m not doing well. I pay if I’m doing well. “
For example, at Carnival, the company states that much of the CEO’s compensation is related to the company’s finances and performance. The company said Donald had not received a cash bonus associated with 2020. And to save cash during the pandemic, the company granted restricted shares instead of salary from April to June. Then, from July to November, Donald’s salary was cut in half.
Rattling at the gate
Washington’s progressives are calling for rule changes to close the gap between CEOs and workers.
Companies need to show that CEOs earn more than regular employees, with a median survey of 172 times this year. This is an increase from 167 times for the same CEO last year. This means that employees have to work a lifetime to achieve what the CEO does in just one year.
A legislative bill proposes a tax increase for companies whose CEO earns more than 50 times the average employee of the company.
In some companies, shareholders reject compensation packages approved by the board of directors.
At the annual meeting of Chipotle Mexican Grill shareholders earlier this month, only 51% of the shares voted in favor of the executive compensation package. It was 95% in the same period of the previous year. Throughout the S & P 500, such “Say-on-pay” votes are routinely approved by over 90%.
Chipotle’s board excluded three months of worst pandemic sales and a few other items when calculating CEO Brian Niccol’s salary. This allowed him to get a higher reward than the other methods.
Chipotle called this move a one-off change that did not reflect Nicole’s ongoing payroll package. Chipotle was one of the relative winners of the pandemic, with earnings up 7.1% and stock prices. Was up 65.7%.
Although not binding, the “Say-on-pay” vote has attracted the attention of Wall Street. Between 2017 and 2019, the stock prices of companies that failed to vote fell well below the S & P 500 over the next 12 months, according to Morgan Stanley.
This trend wasn’t maintained last year as the pandemic could have confused everything, but Morgan Stanley strategists said the failure of the “Say-on-pay” vote could hurt stock prices. He states that he still sees it as a danger signal.
And if there’s anything that Wall Street investors are interested in, it’s how well they are getting paid.
Whether pandemic or not, the CEO’s salary will rise again.Typical Package: $ 12.7M | Business
Source link Whether pandemic or not, the CEO’s salary will rise again.Typical Package: $ 12.7M | Business