May 18, 2020

Alert

Compensation and Human Capital Corporate Actions in Response to COVID-19

Compensation Advisory Partners (CAP) is monitoring corporate public announcements to compile a database of pay actions taken in response to the COVID 19 pandemic:

  • Compensation actions for chief executive officers (CEOs), executives, boards of directors and employees
  • Workforce reductions and expansions
  • Changes in dividend policy and share buybacks (not covered in this document)

These indices were selected because 1) they allow for size comparisons and 2) they compose the S&P Composite 1500 index, which covers approximately 90 percent of the market capitalization of U.S. public companies. As of May 18, 2020, CAP had identified actions taken by 510 companies in these indices, with many companies taking multiple actions in response to COVID-19 (company detail, including over 600 additional U.S. and non-U.S. companies, is available on our COVID-19 Resource Center)

Key takeaways of actions to date include:

    • Corporate compensation and human capital actions are made for several reasons, depending on each company’s situation. The most common reasons are:
      • Help companies conserve cash
      • Ensure employee safety
      • Compensate front-line employees for increased risk
      • Meet the changing demand for products and services caused by the pandemic
    • The industry sectors that are most impacted by the pandemic are retail, consumer services and the automotive industry
    • CEO salary cuts are the most prevalent action, with approximately 20% of companies in the S&P 500, S&P 400 and S&P 600 cutting salaries for top executives
    • CEO salary cuts are often seen in conjunction with other adverse corporate actions, such as executive salary cuts, cuts in the cash retainers paid to the board of directors, and reductions in pay and headcount for the broader employee population
    • Adverse broad-based actions are more likely in the S&P SmallCap 600, which illustrates that the economic fallout from the pandemic is having a greater impact on smaller companies and their employees
    • Large companies in the S&P 500 are more likely to take positive broad-based actions than smaller peers. Examples of positive actions are workforce expansion and increased compensation, either on an hourly basis or through a one-time bonus

     
    For more information about our services, please contact us