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We are all together, business leaders told us last year, as they pledged to give up parts of their salaries or bonuses in recognition of the damage caused by Covid-19.
At the end of last June, 502 companies listed in the US, 17 percent of the Russell 3000, had announced “adjustments” to the salaries of their top executives. Most likely they were retailers, travel groups and manufacturers trumpet of the will of its leaders to share the pain.
It is part of a larger shift in corporate culture that has seen U.S. leaders speak out on important issues ranging from voting rights i racial inequality a climate change. Last year, nearly 19% of large public companies around the world included some form of environmental or social goal in their executive compensation plan, double the share in 2017, says ISS ESG, the proxy advisor’s data arm.
While some followers of “stakeholder capitalism” may be true believers, others use the doctrine as marketing ploy and a way to avoid investor pressure to get results.
Taking personal pay cuts during the pandemic last year allowed corporate leaders to literally put their money where their mouths were. But since executives are executives, the end result of CEO remuneration turns out to be quite different from what was suggested to the first incumbents.
Instead of shrinking, the CEO’s average salary package for Russell 3000 companies rose 6% last year, according to ISS ESG. For larger companies, the average salary of S&P 500 CEOs, including bonuses and long-term shares, reached $ 13.3 million in 2020, marking the 11th consecutive annual increase. Top executives also used corporate aircraft more widely for personal travel, corporate disclosures are shown.
In contrast, the average compensation of employees of S&P 500 companies fell by 17% last year, so that the ratio between CEO remuneration and employee remuneration increased from 182 to 227.
This was largely an American phenomenon. Most European and British bosses took Covid pay cuts alongside their workers: the average salary package for Stoxx 600 and FTSE 100 bosses fell 18% each, to about $ 3 million.
U.S. payment plans have always depended more on stocks, and stocks have been torn apart by central bank support and the rapid deployment of vaccines. The S&P returned firmly to pre-pandemic levels in November and has since reached a new series of new maximums. He Euro Stoxx i FTSE 100 they finally regained their Covid losses last week.
But that’s not the whole story. Some companies have been playing fast and with pay rules to reward top executives when goals were lost. Chipotle fast food group, for example, excluded a three-month lockout (March, April and May) from the calculation of key metrics and some Covid-related expenses, according to ISS, which added that the changes increased the total salary of the CEO Brian Niccol at $ 23.6 ma $ 38 million.
Others have gone from absolute goals to performance compared to peers, a measure that can still be paid for in years with losses. “It’s a challenge for compensation committees,” says Courtney Yu, research director of the payroll data group Equilar. “How do you get executives to see this and get your business out?”
Investors, with good reason, have a pretty dim view of these changes. Most executive compensation plans continue through annual general meetings, such as a Intuit, Which one won praise to limit payments and not reset goals. But a growing number are set with fierce opposition to size, vague goals, or the feeling that management has received a free pass.
So far, 86 large U.S. companies have maintained AGM and nearly 9 percent of payment plans have failed or received less than 60 percent support, up from 5 percent this time last year, Equilar says. Investors voted down the payment plans Walgreens Boots Alliance, which he said would be “unjust and reckless to penalize ” the Covid executive team, i Starbucks, where the problem was a $ 50 million retention bonus for Chief Kevin Johnson.
There are also rebellions in companies such as General Electric, AT&T and Wells Fargo. Johnson & Johnson shareholders will vote Thursday on Alex Gorsky’s reward with $ 29.6 million for a “strategic performance,” even though the drug maker failed to meet most financial goals and shelled billions for asbestos claims for opioids and talc.
The UK is not immune: National Express, Glencore and AstraZeneca will soon be voting on payment plans that CEO Lewis Lewis considers excessive or disconnected from Covid reality.
CEOs can talk until the cows come home about corporate responsibility. Until companies and shareholders put an end to the “bosses I win, even if I win,” payment plans, we shouldn’t believe them.
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