The coronavirus pandemic took its toll on corporate profits in 2020 – but not on executive compensation, except for a few high-profile exceptions.
Out of the 25 chief executives named in the Business Journal’s Chief Executive Compensation list, only six saw a decrease in their total company compensation when compared to 2019. Just four saw a drop in their aggregate compensation, which includes vested stock options.
Matteo Tonello, managing director of Environmental, Social and Governance (ESG) at The Conference Board, a New York corporate governance nonprofit, said that the firm was not seeing a general decline in compensation.
“There are instances where there has been a decline, and it is a response to the understanding by companies that they have to make adjustments to their compensation just to face the general situation,” Tonello said.
His organization has been keeping track of U.S. public companies that have announced reductions in base salary for their executives or changes to their incentive plans in recognition of the economic circumstances brought on by the pandemic.
“There are a number of companies that have made those decisions and it was either before the pandemic or in the spring 2020,” he said. “They were not necessarily affected by the operating performance of the company.”
He would need to go into next year before he could see the impact of the pandemic on compensation and the payout, Tonello added.
According to data provided by The Conference Board and data analytics firm Esgauge also in New York, out of nearly 700 companies on the Russell 3000 index making executive compensation reduction announcements, just three are from the San Fernando Valley region – Walt Disney Co., Cheesecake Factory Inc. and Marcus & Millichap Inc.
At Burbank entertainment and media giant Disney, executive chairman Robert Iger, who stepped down as chief executive just weeks before the start of the pandemic in the U.S., decided to forego his base salary starting in April through the end of the fiscal year on Oct. 3. Iger was No. 3 on the Business Journal’s list although his 2020 total company compensation decreased by 56 percent compared to the prior year.
Bob Chapek, the current Disney chief executive, took a 50 percent reduction in salary from April through late August of last year. He ranks No. 5 on the list.
David Overton, chief executive of the Cheesecake Factory, elected to reduce his 2020 base salary by 20 percent effective April 1, 2020 with an end date to be determined. Other named executives at the Calabasas restaurant chain also took a 20 percent reduction in salary. Overton’s total company compensation went down by 12 percent putting him at No. 11 on the list.
And at Marcus & Millichap, also in Calabasas, the base salary of Hessam Nadji, the company’s chief executive, was reduced by 25 percent, and the base salary of the other company named executive officers was reduced by 20 percent with an end date to be determined. Nadji saw his total company compensation decrease by 9 percent last year, placing him at No. 12 on the list.
Others seeing a decrease in total company compensation include David Spector, chief executive of PennyMac Financial Services Inc. with a drop of 18 percent from 2019 making him No. 6 on the list and Therese Tucker, executive chairwoman of Woodland Hills accounting software developer BlackLine Inc. with a steep decline of 63 percent from 2019 to 2020, putting her at No. 8 on the list. Tucker had been chief executive of the company until Jan. 1.
Say on Pay
The biggest news to come out of executive compensation so far this year has been about the failure to pass Say on Pay resolutions by public company shareholders, Tonello said.
According to the Center on Executive Compensation, an Arlington, Va. advocacy group, Say on Pay is “a mandatory, nonbinding shareholder resolution offered by company management which asks investors to approve the compensation package for a company’s named executive officers.” The option for Say on Pay was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act passed in 2010.
What is interesting is that Say on Pay was introduced at the beginning of one of the longest bull markets in history, Tonello said.
The pandemic has changed the entire scenario and context of those resolutions as more scrutiny emerges on them, he added.
In fact, Tonello predicted that there will be more attention given to Say on Pay votes as the last decade has created more engagement between individual shareholders and the companies they invest in.
“The scrutiny that we started to see on Say on Pay this year will continue into the future,” Tonello said.