143 public companies have cut CEO pay

The coronavirus economic crisis has left around 22 million people filing for unemployment so far, a staggering number that wiped out all job gains since 2009.

One immediate response to the economic shutdown and the sharp job cuts was business leaders taking pay cuts. Airlines and hospitality companies lead the way, slashing executive pay — usually base pay, a fraction of stock-based total compensation. And since then many companies have joined in an effort to avoid mass layoffs. In some cases, this has extended to salaried employees.

Gallagher, a human resources consulting firm, has been tracking public companies’ SEC 8-K filings, which track compensation changes. So far, 151 publicly traded firms have announced adjustments to compensation, with 143 of those adjustments being negative adjustments. In every instance of a compensation reduction, the CEO’s pay was reduced. There are 3,743 public companies in the U.S. 

Ed Bastian, CEO of Delta Air Lines, was among the first wave of CEOs that took a pay cut due to the coronavirus crisis. REUTERS/Steve Marcus

Just over half of these publicly traded companies have adjusted compensation to all three pillars of leadership in companies: CEOs, top executives, and outside directors. In general, most cuts to the CEO’s pay have been accompanied by some other cut: just 9% of companies have cut only the CEO’s pay.

The median reduction for CEO pay has been 50%, ranging from a 10% cut all the way down to a $1 salary. 

Outside directors have also seen their cash retainers fall by a median of 50%, often the same number as whatever the CEO’s compensation was reduced by.  

While certain industries that rely on human proximity were impacted first and deepest, the fallout has reverberated throughout the economy. 

Certain industries have dominated the compensation reductions. Retail and consumer sectors made up almost half of the SEC filings (43%), a category that Gallagher counts as “retailers, airlines, cruise lines, trucking companies, hotels and restaurants.”

Industrial products made up 18% of the reductions, with entertainment, media, and communications following at 12%. Other affected sectors included tech, energy and mining, real estate, pharma, and health industries. 

Non-executive reductions 

The CEOs, outside directors, and other executives weren’t the only employees to see reductions in salary. Of the companies that have announced compensation changes, 16% of them announced reductions in regular salaried employees, with the amount of the reduction usually tied to their salary — with higher earners seeing bigger cuts.

 For these companies, the median salary cut was 20%, and ranged from 15% to 50%. On the flip side, some companies have increased pay, providing extra money for hazardous jobs in certain industries.

A view of baggage claim at the United Airlines terminal at Los Angeles International Airport during the outbreak of the novel coronavirus, which causes COVID-19, April 16, 2020, in Los Angeles. (Photo by VALERIE MACON/AFP via Getty Images)

In general, Gallagher’s analysis found that two-thirds of companies structured these pay reductions as “temporary,” though didn’t assign any specific time frame. Others announced changes lasting one quarter up to the end of 2020.  

“It is worth noting that most (two-thirds) of retail and consumer companies reporting reductions with specific lengths noted longer reduction periods of six months or nine months, which is not surprising given the challenges the retail and consumer industry is facing,” Gallagher analysts wrote.

A few of the companies that have announced reductions are hoping to pay the amounts back in the future, effectively creating a salary deferral instead of a true reduction.

Companies have gotten creative: Gallagher research found that some executives are being paid only enough to allow them to receive benefits from the company. Others have seen salary increases frozen or reduced as another way to cut costs without cutting jobs. 

Some companies have chosen to pay more (or continue to pay) in restricted stock units that vest in the future, like Hyatt. Other companies have suspended or reduced 401(k) matches, including Amtrak, Sabre Corp. and Norwegian Cruise Lines. Some have eliminated or reduced bonuses, like Caterpillar, which is foregoing bonuses for all eligible employees.

Gallagher was careful to note that this information comes from 8-K filings, which companies use to report public affairs events that investors might want to know. That doesn’t necessarily cover other sorts of beneficial things for workers, such as not counting paid time off to battle coronavirus, suspending layoffs, or helping a workforce in need.

Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.

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