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Executive and Director Compensation Reductions in the COVID-19 Era

An Ongoing Review of Russell 3000 Disclosures

As many businesses discharge, furlough, or drastically reduce pay to large shares of their workforces, some compensation committees are announcing their decision to cut base salaries for C-suite executives as well as board cash retainers.

The Conference Board, in collaboration with Semler Brossy’s research team and Esguage Analytics, is keeping track of SEC Form 8-K filings by Russell 3000 companies announcing these reductions. For the live database and some helpful visualizations of key trends across business sectors and company size groups, click here.

The following are some key observations from disclosures made since March 1, 2020. (Note: The commentary below refers to disclosures made as of April 24, but the database is updated weekly; please review the database and visualizations for the most current information).

  • To date, 11 percent of the Russell 3000 have announced executive base pay cuts in light of COVID-19. The number of announcements peaked in early April and softened in recent weeks. In total, 342 companies had announced some type of base salary reduction for their leaders as of the end of the week of April 19. The week of April 5 saw the highest number of announcements (94 in the Russell 3000, up from 81 in the previous week). The number declined to 55 in the week of April 12 and to 39 in the week of April 19. As disclosure data on these reductions are disseminated and companies continue to assess the impact of the crisis, we may see a second wave of announcements in the coming weeks.
  • More than 60 percent of the announcements came from hard-hit business industries such as hospitality and retail, but the list also includes dozens of health care firms and several small information technology companies. The consumer discretionary sector, including industries such as specialty retail and hospitality, is by far the most represented among companies announcing leadership pay reductions (40.4 percent of the total). It is followed by the industrials sector, including the airlines and aerospace industries (21.6 percent). However, the list also includes 38 health care companies of various sizes and several small information technology companies. The communication services sector represents 4.4 percent of the total number of announcements. The sectors that have not, to date, announced a significant number of executive pay reductions include materials, consumer staples, and financials. The current list includes no utilities companies. 
  • Most of the pay reductions have been announced at midmarket companies. Forty-three percent of the announcements were made by companies reporting annual revenue between $1 billion and $4.9 billion, and 25 percent by companies reporting annual revenue between $100 million and $999 million. Two percent of the pay-cut filings came from the largest companies in the Russell 3000 (with annual turnover exceeding $50 billion), and another 2 percent by the second-largest company size groups (with annual revenue between $25 billion and $49.9 billion). The analysis of financial and real estate companies by asset value shows that most announcements were made by hospitality-focused REITs in the $1 billion–$9.9 billion asset value group.
  • Among those that announced pay cuts, one-third of CEOs won’t collect a base salary this year. Twenty-seven percent of the Russell 3000 companies that announced CEO salary reductions cut it in its entirety, while 19 percent cut it by 50 percent; only 6 percent of the sample reduced it by 20 percent or less, and 8 percent announced the intention to reduce the CEO salary without disclosing by how much. Communications services companies reported the largest median CEO pay cut (55 percent), followed by consumer discretionary, industrials, and real estate (each with a 50 percent CEO pay cut, at the median). The least affected CEOs are those of consumer staples (25 percent pay cut, at the median) and energy companies (20 percent).
  • In most cases, executives beyond the C-suite are also receiving pay cuts. Sixty-one percent of the companies announcing reductions are applying them to compensation for senior managers beyond the top five highest-paid executives. However, 31 percent of the companies that disclosed reductions limited them to the CEO and other named executive officers (NEOs), whereas 8 percent cut CEO pay only.
  • A tiered approach is used for NEOs and other senior executives. The reduction percentage applied to NEOs and other senior managers is generally quite lower than the one seen for CEO salaries. For NEOs, the most common cut falls between 20 percent and 50 percent (29 percent of the sample), whereas 18 percent reported base salary reductions of 20 percent or less, and only 3 percent reported forfeiting their entire base salary. For other executives below the top five, the most common base pay cut is of 20 percent or less (18 percent of the announcement sample). These findings confirm a tiered approach, where the percentage of the pay cut rises with salary level.
  • When announced for executives, cuts tend to extend to cash retainers for board members, and in a quarter of cases directors took an even bigger hit (in percentage terms) than CEOs. The majority (64 percent) of companies reducing executive base salaries are extending cuts to the cash retainers paid to their board’s nonemployee directors. In a show of solidarity with the executive team, in most cases the percentage of the reduction applied to director cash retainers is the same as the one disclosed for the company’s CEO, while 26 percent reported that director pay was reduced by a higher percentage than CEO pay. Of those companies that announced director pay reductions, 33 percent of directors forgo their full retainer and 20 percent cut it by half, while 7 percent of companies stated that they had not yet finalized the percentage of the cut.
  • Other observations Most executive reductions are limited to base salary, but some companies have chosen to also cut or eliminate annual executive bonuses for 2020. In some cases, in lieu of a reduction of compensation payments to their executives, compensation committees opted for a deferral—either to later in the year or to next year. Deferrals may be conditioned upon achieving specific financial targets. Some executives have elected for a voluntary salary waiver to fund onetime cash bonuses to eligible employees or to endow a relief fund created by the company to address hardship faced by its workforce. The table links to Form 8-K excerpts where these additional details may be found.

The database of salary reductions offers a snapshot of the changes to compensation that companies have been disclosing since the beginning of the crisis. However, it is limited to base salaries and cash retainers and does not extend to other components—namely, annual bonuses and equity grants—that often constitute a large portion of total compensation and that cannot yet be estimated. Boards will want to consider proposed CEO salary cuts not in isolation, but in the broader context of compensation for senior executives and the board itself. For this reason, the database should be viewed as a complement to the suite of reports and benchmarking tools periodically maintained by The Conference Board, Semler Brossy, and Esguage Analytics to provide comprehensive executive and director compensation analysis and assist companies in the design of compensation plans.

Click here to access the live database



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Mark Emanuel

Managing Director
Semler Brossy Consulting Group

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Kathryn Neel

Managing Director
Semler Brossy Consulting Group

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Todd Sirras

Managing Director
Semler Brossy Consulting Group


Matteo Tonello

Managing Director, Environmental, Social, and Governance (ESG)
The Conference Board


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