Dive Brief:
- CEO pay climbed in 2020, The Wall Street Journal reported April 11. The Journal analyzed the pay of more than 300 S&P 500 CEOs who had been in their roles for at least a year and found that median pay increased from $12.8 million in 2019 to $13.7 million in 2020. CEOs received the pay increase despite companies’ modifying their performance targets and introducing pay changes for staff due to economic challenges presented by the COVID-19 pandemic.
- While many CEOs gave up "some or all" of their salaries during the pandemic, the Journal said, salary constitutes less than 10% of compensation for most large-company CEOs. Equity awards and cash bonuses comprised the majority of the pay, including special stock awards contained in some of the biggest pay packages.
- The practice has drawn the disapproval of some shareholders. Close to 1 in 6 companies holding say-on-pay votes — those that allow shareholders to weigh in on executive compensation — since Sept. 1 have received less than 70% support for proposed payment packages, the Journal reported. The drop in support for proposed pay is a sharp one from the year before, when only 1 in 12 of those same companies received less than 70% support during say-on-pay votes.
Dive Insight:
News of the rise in CEO pay comes after a tough year for workers. Early in the pandemic, the unemployment rate peaked at 14.8%, its highest rate since the Bureau of Labor Statistics began tracking the data in 1948. Per the Congressional Research Service, young workers, women, workers without a college degree, part-time workers, and racial and ethnic minorities experienced the greatest impact. People with disabilities also dealt with high unemployment.
In addition to layoffs, employers implemented hiring freezes and furloughs, reduced pay and suspended pay increases. While the unemployment rate has largely rebounded and employers planned to up workers’ salaries in 2021, per an XpertHR survey, a Randstad US survey conducted last August found employees’ expectations for salary increases had dropped.
Rising CEO compensation in a year of economic turmoil for companies complicates the idea that executive pay differs from that of other workers due to its ties to company performance. The Journal notes the rise in compensation extended even to companies that had experienced significant hardship. It cites the example of Norwegian Cruise Line Holdings, a company that lost $4 billion in 2020 with a halt in cruises, yet doubled the pay of CEO Frank Del Rio to $36.4 million, due in part to bonuses attained through a contract extension.
The Journal’s reporting also highlights the evolving attitude of shareholders to ever-ballooning executive pay. In a recent Bloomberg Opinion piece, Michelle Leder, a shareholder of several stocks, noted that because the U.S. Securities and Exchange Commission does not require shareholder approval of executive compensation to be binding, shareholders often have less say on the matter than it may seem.
Starbucks shareholders are among the latest to vote down an executive pay plan, rejecting a March 17 proposal to compensate CEO Kevin Johnson with $1.86 million for his 2020 response to COVID-19 and $50 million in retention pay if he stays until 2022.
