NEW YORK (AP) — As COVID-19 devastated the world last year. The CEO’s hefty pay appears to be as much a threat as anything else.
Good luck to those CEOs. Many have board members willing to view the pandemic as an extraordinary event beyond their control. Across the country, the board has changed the complex formula that determines CEO compensation and other moves. that help compensate for the loss caused by the crisis
As a result, the compensation of CEOs of large companies soared again last year Even though the pandemic sent the economy into its worst quarter on record. and reduce the profits of companies around the world. The median package for CEOs of S&P 500 companies is $12.7 million in 2020, according to data analyzed by Equilar for The Associated Press. That means half of CEOs do more surveys. and the other half do less. That’s more than the median 5% for the same CEOs in 2019 and up from a 4.1% increase in last year’s survey.
At Advance Auto Parts, CEO Tom Greco’s wages for 2020 are on the verge of impact due to pandemic-related expenses. A total of $60 million in benefits and additional costs for medical expenses for hand sanitizer and other safety equipment was drawn in two main metrics that helped determine his performance-based compensation. However, the Board’s Remuneration Committee considers these expenses to be extraordinary and unexpected. therefore not included in the calculation. That helped Greco’s total compensation increase 4.7 percent last year to $8.1 million.
at the carnival The cruise operator has given management stock funding. In part to encourage its leaders to stick with the company as the pandemic has forced it to halt navigation and lay off workers. As for CEO Arnold Donald’s 2020 compensation, those grants are worth $5.2 million, although their full value will depend on how the company takes on carbon reductions and other measures in the coming years that help Donald. The company received total compensation of $13.3 million for the year, an increase of 19% from the previous year. Although Carnival lost $10.2 billion in the fiscal year.
meanwhile Full-time employees are also profitable. but not equal to their leader and millions of others lost their jobs.
Wages and benefits for nongovernment workers rose only 2.6% last year, according to US government data. that ignores the impact of workers moving between industries It’s an important distinction as low-income earners lose their jobs as the economy shuts more than professionals who can work from home.
“This should be a year of mutual sacrifice,” said Sarah Anderson, Global Economic Program Leader at the Institute for Left-Left Policy Studies. The vanguard pays the price.”
The AP compensation study included pay data for CEOs of S&P 500 companies who served at least two full fiscal years at their company. It filed a proxy statement between January 1 and April 30, excluding some highly paid CEOs who were not. meet that criteria Pay numbers for CEOs sometimes include giving them stocks and options they may never ultimately receive unless certain performance goals are met.
Sophistication and CORONAVIRUS
Last year’s 5% profit for the median CEO paid masks shows how much has changed in wages. Some companies flourished as a direct result of the pandemic. Sales grew sharply for Lowe’s amid massive nesting across the country, and CEO Marvin Ellison nearly doubled the payout after the company’s shares more than doubled the total return of the S&P 500 throughout the fiscal year.
Meanwhile, other CEOs saw their pay cuts. At Duke Energy, the board cut CEO Lynn Good’s short-term performance pay after earnings per share fell below its initial target. In part because industrial customers were using less energy during the pandemic, Good’s wages dropped 2.6 percent to $14.3 million, although revenues were within the range Duke had projected for Wall Street at the start of the year. Duke did not. has adjusted the formula to increase the wage of Good because of the epidemic
Overall, 61% of the 342 CEOs in this year’s survey received an increase in pay last year. That’s almost the same percentage as 62% in 2019 as the economy and corporate profits grow.
Although many CEOs agree to cut their salaries during the year. As a mutual sacrifice and to save a small amount of money for the company, about 1 in 5 CEOs in this year’s survey received less salary in 2020 than the year before.
But the salary is usually only a small fraction. The percentage of total CEO compensation comes from a notoriously complex formula. Each year, companies fill their proxy pages with charts and footnotes showing how the majority of their CEO’s compensation increases or decreases based on performance. of the organization It’s here in a nuanced area where many companies adjust levers that ultimately help CEOs get paid more.
Boards often stick to the formula set for CEOs to pay at the beginning of the year. But the sudden failure of the global economy prompted a rethink. What made things even more cloudy was that they had quite a few historical guides on how to proceed.
“Many committees asked us this question: Does this compare to the financial crisis? What are people doing?” said Melissa Burek, a partner at Compensation Advisory Partners, an advisory firm that works with the board.
But the pandemic is very different from the 2008 economic collapse, primarily because the crisis was caused by the virus, rather than the CEO’s taking on too much debt and risk. As the board has adjusted its goals to make the CEO’s incentive pay less, many have limited the size of the possible payouts.
“I think that’s acceptable. When unemployment is very high Do we feel good about paying our CEO at this level?” Compensation Advisory Partners Compensation Advisory Partners Kelly Malafis said of the board’s thoughts. “The answer is: ‘We’re doing this for efficiency. When the performance is bad, we don’t pay. When the results come out good We have to pay.’”
For example, at the Carnival The company says CEO compensation is largely linked to the company’s financial and operating performance. The company said Donald was not receiving cash bonuses tied to 2020 and to keep cash during the pandemic. The company then funded him in a limited stock instead of salary from April to June. then from July to November also cut Donald’s salary in half.
rattling at the door
Washington progressives are pushing for regulatory changes to bridge the gap between CEOs and employees.
Companies have to show how much their CEOs make more money than the average worker. And the median in this year’s survey was 172, up from 167 times for the same CEO last year. This means that employees have to work a lifetime to create what the CEO does in just one year.
A bill in Congress proposed raising taxes for companies where CEOs make 50 times or more of the average worker at the company.
at some companies Shareholders are pushing for a compensation package approved by the board.
at Chipotle Mexican Grill’s annual shareholder meeting earlier this month. Only 51% of voting stocks gave a thumbs up to executive compensation, compared to 95% a year earlier. In the S&P 500 index, such “pay-to-talk” votes are often approved by more than 90%.
Chipotle’s board excluded three months of sales results from the worst of the pandemic. along with other items many more While calculating compensation for the company’s CEO, Brian Niccol, he was paid much more than he was paid.
Chipotle called the move a one-off adjustment that does not reflect Niccol’s ongoing payout package. Chipotle was one of the winners of the pandemic. Revenue rose 7.1% and stocks soared 65.7 percent.
while they have no obligation Pay-to-mouth voting is gaining increasing interest from Wall Street between 2017 and 2019. The stocks of companies that failed to vote theirs lagged behind the S&P 500 over the following 12 months, according to Morgan Stanley.
That trend didn’t happen last year. When a pandemic can make things unsettling But Morgan Stanley strategists say they still see a failed “Say-on-pay” vote as a red flag that stocks may struggle.
And if there’s one thing Wall Street investors care about, it’s how well they’re compensated.
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