Compensation Advisory Partners (CAP) assessed human capital actions taken by companies in the Financials sector in response to the COVID-19 pandemic. Key findings include:
- The Financials sector was moderately impacted by the COVID-19 pandemic, with 27% of companies in the S&P Composite 1500 Index taking human capital actions.
- Banks, which often have retail operations, reported the most actions (35%) – many of which were positive for employees, such as expanded time off and healthcare benefits, and one-time bonuses and additional pay for on-site workers
- The five most prevalent human capital actions by Financial Sector are expanded benefits programs, one-time bonuses for non-executives, additional payments for on-site employees (non-executives), reducing CEO base salary, and guaranteed pay continuity for non-executives
- Executive salaries were reduced, particularly in Diversified Financials and Insurance:
- Median salary reductions were 30 percent for chief executive officers (CEOs), while median salary reductions for other executives were 20 percent.
- For boards of directors, pay was cut by a median of 28 percent.
The PDF of the report provides additional data for the Financials sector.
The human capital actions that CAP is tracking include pay cuts; changes to annual and long-term incentives; furloughs; workforce reductions; suspended 401K matches; enhanced health and welfare benefits; additional pay for frontline workers; pay continuity; and workforce expansions. CAP will continue to monitor corporate public announcements of COVID-19 actions.
Compensation Advisory Partners (CAP) assessed human capital actions taken by companies in the Communication Services sector in response to the COVID-19 pandemic. Key findings include:
- The Communication Services sector and its Telecommunication Services and Media & Entertainment industries were hit significantly by the COVId-19 pandemic.
- 54% of the Communication Services companies in the S&P Composite 1500 Index reported human capital actions in response to the pandemic. In contrast, 41 percent of companies in the S&P 1500 reported actions.
- Of the industries in the Communication Services sector, Media & Entertainment was particularly hard hit, with 59 percent of companies reporting human capital actions. In the Telecommunication Services industry, 38 percent of companies took human capital actions in response to COVID-19.
- Pay reductions for executives and board members are the most prevalent human capital actions in the Communication Services sector.
- Median salary reductions were 50 percent for chief executive officers (CEOs), while median salary reductions for other executives were 20 percent.
- For boards of directors, pay was cut by a median of 25 percent.
- In addition to pay reductions for executives and boards, the most prevalent human capital actions in the Communication Services sector were furloughs, workforce reductions and suspended raises and/or bonuses.
The PDF of the report provides additional data for the Communication Services sector.
The human capital actions that CAP is tracking include pay cuts; changes to annual and long-term incentives; furloughs; workforce reductions; suspended 401K matches; enhanced health and welfare benefits; additional pay for frontline workers; pay continuity; and workforce expansions. CAP will continue to monitor corporate public announcements of COVID-19 actions.
Compensation Advisory Partners (CAP) assessed human capital actions taken by companies in the Industrials sector in response to the COVID-19 pandemic. Key findings include:
- The Industrials sector and its Capital Goods, Commercial and Professional Services, and Transportation industries were hit hard by COVID-19, as reflected by the percentage of companies taking actions in response to the pandemic.
- Half of the Industrials companies in the S&P Composite 1500 Index reported human capital actions in response to the pandemic. In contrast, 39 percent of companies in the S&P 1500 reported actions.
- Of the industries in the Industrials sector, Transportation was particularly hard hit, with 69 percent of companies reporting human capital actions. In the Commercial and Professional Services industry, 51 percent of companies took human capital actions in response to COVID-19, while 45 percent of companies in the Capital Goods sector took actions.
- Pay reductions for executives and board members are the most prevalent human capital actions in the Industrials sector.
- Median salary reductions were 38 percent for chief executive officers (CEOs), while median salary reductions for other executives were 20 percent.
- For boards of directors, pay was cut by a median of 30 percent. The range of director pay cuts is similar to the range of CEO salary cuts.
- In addition to pay reductions for executives and boards, the most prevalent human capital actions in the Industrials sector were furloughs, pay reductions for employees, and workforce reductions.
The PDF of the report provides additional data for the Industrials sector.
The human capital actions that CAP is tracking include pay cuts; changes to annual and long-term incentives; furloughs; workforce reductions; suspended 401K matches; enhanced health and welfare benefits; additional pay for frontline workers; pay continuity; and workforce expansions. CAP will continue to monitor corporate public announcements of COVID-19 actions.
Compensation Advisory Partners (CAP) has been tracking executive compensation, employment and shareholder actions announced by U.S. companies in response to the COVID-19 pandemic since March 2020. Initial executive compensation actions, such as chief executive officer (CEO), other executive and board of director pay reductions, were common, and aimed at conserving cash and demonstrating shared sacrifice with employees and shareholders. As the pandemic continues, some companies are announcing updates to earlier salary actions, and changes to annual and long-term incentive plans. Not all companies are disclosing such actions, so a better picture of COVID-19’s impact on executive compensation will not be known until the 2021 proxy season. However, the actions that are being announced provide a glimpse into decisions being made by compensation committees across corporate America.
Salary Actions
CAP found that approximately 25 percent of companies in the S&P 500, S&P MidCap 400, and S&P SmallCap 600 had reduced pay for CEOs and/or other executives by mid-July. When these announcements were made, some companies provided the duration for the pay cuts, while others left the duration more open ended. As the pandemic continues, some companies have announced actions to restore all or a portion of salaries, extend salary cuts or make up lost compensation.
Recent Salary Actions
Restored Salaries |
|
Aon |
Restored employee salaries; employees will be repaid for the two-month, 20% salary decrease plus receive an additional 5% of the withheld amount; executive salary cuts remain in place |
Darden Restaurants |
Restored named executive officer (NEO) salaries after two-month, 50% to 100% salary cuts |
Flexsteel Industries * |
Restored salaries of three NEOs (chief information officer and two vice presidents) after two-month, 25% salary cuts |
Meritor * |
Partially restored executive and employee salaries after two-month cuts; executive salary cuts reduced from 50%-60% to 15%-20%; employee salary cuts first reduced from 40%-50% to 20%-25% and then down to 15%-20% |
Thor Industries |
Restored salaries after two-month, 100% salary cut for the CEO, and 40% salary cuts for NEOs and other key executives |
Ulta Beauty |
Restored CEO salary after two-month, 100% salary cut |
Extended Duration of Salary Reductions |
|
Flexsteel Industries * |
Extended the CEO’s and one other NEO’s 25% salary reductions from two months to six months |
Henry Schein * |
CEO extended 100% salary reduction from three months to nine months |
Hexcel |
Extended CEO salary reduction of 50% from three months to six months |
Norwegian Cruise Line |
Extended salary reductions of 20% for NEOs from three months to six months |
Scientific Games * |
Extended salary reductions of 50% for two NEOs from three months to four months |
Extended Duration but Decreased the Amount of the Reductions |
|
Henry Schein * |
Current 50% salary cut for non-CEO NEOs reduced to 37.5% for an undefined time period; current salary reduction for employees above the VP level of 10%-25% reduced to 7.5%-18.75% for an undefined time period |
Invacare |
Initially planned to defer executive salaries for at least six months but shifted after one month, to a 10% salary reduction for three months |
Meritor * |
After two months, decreased CEO salary reduction from 60% to 20%; decreased NEO and executive salary reduction from 50% to 15%; decreased salary reductions for all other salaried employees from 40%-50% to 10%-15% |
Scientific Games * |
Extended CEO’s salary reduction from three months to four months, and decreased his current salary reduction from 100% to 50% |
Other Noteworthy Salary Actions |
|
Meritor |
Executives and employees may recoup salary lost during two-month cuts through cash incentives based on the achievement of liquidity and cost-savings goals. (The company announced that executives are unlikely to achieve annual incentive goals because of COVID-19.) |
OncoCyte |
CEO deferred 30% of salary; deferred salary will earn interest at 10% per year |
* Company took multiple salary actions
Annual Incentives
In the early months of the pandemic, only a small percentage of companies in the S&P 500, S&P MidCap 400, and S&P SmallCap 600 announced actions to change their annual incentive plans. At that time, the announcements generally were made in conjunction with salary cuts, and the annual incentive actions were typically cuts and cancelations.
Now that companies have more information about the economic impact and disruption caused by the pandemic, they are announcing changes to their annual incentive plans. The annual incentive actions vary, and include changes to performance measures, reduced opportunities, reduced maximum payouts, plan cancelations, and adjustments to payout timing and measurement periods.
Recent Annual Incentive Changes
Adobe |
Adjusted 2020 performance goals and payout ranges |
Covia Holdings |
Maximum payout of 2020 plan capped at target levels; implemented quarterly payouts |
Darden Restaurants |
Shortened 2020 performance period by three months (by ending February 23) to exclude the pandemic |
IHS Markit |
Reduced 2020 incentive target amounts (applied previously approved cash incentive target percentages to salaries reduced in 2020) |
MAXIMUS |
Maximum payout of 2020 plan capped at target levels |
Merit Medical |
Adjusted 2020 goals to be based 100% on cost savings and revenue from COVID-19 related product sales; widened performance curve; maximum payout capped at target levels |
Newell Brands |
Retained 2020 financial performance metrics and added full-year operational targets at the corporate and business unit levels (reduce stock-keeping units, enhance margin); divided plan in half – performance for the first half will be evaluated on original 2020 budget plan and performance for the second half will be evaluated on more recent forecasts; maximum payouts reduced; business unit participants eligible for “kicker” based on the unit’s performance relative to the original targets |
Oasis Petroleum |
Reduced awards by 50%; adjusted 2020 goals for all employees to focus on achievement of quarterly results and retention |
OncoCyte |
CEO deferred portion of discretionary 2019 bonus; deferred bonus will earn interest at 6% per year |
Quest Diagnostics |
New additional goals for 2020 to support its pandemic response plan (testing, capacity, deployment, coordination, etc.) |
Sabre |
Maximum payout of 2020 plan capped at 50% of target; delayed payout |
Signet Jewelers |
2020 payout delayed; 2021 plan split into two performance periods, and goals for first period focus on liquidity |
Vista Outdoor |
Added adjustment factor to the 2021 bonus to allow the compensation committee to adjust actual 2021 results for the impact of COVID-19 |
WestRock |
2020 bonuses paid at threshold level and 100% in stock |
WEX |
Changed 2020 metrics and performance will be measured against goals for second half of 2020 |
Worthington Industries |
Bifurcated 2021 plan with different targets for each six month period |
Long-Term Incentives
The pandemic derailed many companies’ short- and long-term business plans, and sent many companies into survival mode. COVID-19 also resulted in steep stock price drops for companies and industries most hurt by the pandemic, and in increased stock market volatility overall. As a result, some companies are re-thinking their long-term incentive (LTI) plans based on new business realities. Some of the changes that companies have announced for LTI plans include adjusting performance measures and goals, changing the mix of LTI vehicles, shortening the duration of plans, reducing award opportunities, and shifting away from performance-linked vehicles that require goal-setting toward retention vehicles.
Recent Long-Term Incentive (LTI) Changes
CarMax |
Shifted to an equity vehicle tied to stock price for 2021 from a performance equity vehicle based on earnings per share (EPS) |
Covia Holdings |
Maximum payout capped at target levels; implemented quarterly payouts |
Hanger |
Shortened performance period of 2017 Special Equity Plan by three months (to 33 months from 36 Months) to omit the impact of the pandemic |
IAMGOLD |
Changed LTI mix to performance share units (PSUs) based on relative total shareholder return (TSR) and return on invested capital (ROIC) from PSUs and options; adopted 20-day weighted average share price for determining awards to avoid executives benefitting from a depressed stock price |
Merit Medical |
Reduced performance equity vehicle target and threshold; capped payout at target |
Oasis Petroleum |
Reduced awards by 50%; adjusted 2020 goals for all employees to focus on the achievement of quarterly results and retention |
Sabre |
Changed 2020 metrics to reflect changes to the timing of completion of certain aspects of these key strategic initiatives |
Scientific Games |
Changed LTI mix to 100% time-vested restricted stock units (RSUs) from a mix of PSUs, time-vested RSUs and options; limited units granted to the number that would have been granted at the pre-pandemic stock price |
Signet Jewelers |
Increased weighting of time-vested restricted stock relative to performance equity; delayed 2021-2023 PSU grant to fall 2020 |
Sonic Automotive |
Shifted to options from a performance equity vehicle based on EPS |
Vista Outdoor |
Changed 2021 goals to be based on the average achievement level of three, one year goals based on EPS growth and organic sales growth; added TSR modifier to allow the compensation committee to adjust actual results for the impact of COVID-19 |
WEX |
Shortened the performance period for core financial metrics to two years to remove the impact of the pandemic but maintained the original three year performance period by adding in a relative TSR modifier that will be measured until the end of the original performance period; relative TSR is replacing previously established financial metrics for 2020 grant |
Xenia Hotels and Resorts |
Shifted to a time-vested equity vehicle from a performance equity vehicle based on relative TSR |
One-Time Cash and Equity Awards
Prior to the pandemic, unemployment was at record lows, and companies were competing aggressively for top talent. The impact of the pandemic on different companies and industries varies widely: Some companies and industries are in survival mode, while others continue to have strong financial positions or have benefitted from the pandemic. Similarly, stock prices have dropped for companies in survival mode, while stock prices have rebounded for other companies and industries.
Amidst the disruption and unprecedented circumstances, many companies find themselves balancing the need to cut costs and conserve cash with the retention of talented leaders and key employees needed to navigate the crisis. In addition to shifting from cash to equity, and from performance equity to time-vesting equity as discussed above, a few companies have announced retention awards for key executives and employees.
One-Time Cash and Equity Awards
Casey’s General Store |
One-time performance recognition equity grant to a senior vice president for leading the company’s COVID-19 task force |
FedEx |
One-time stock option grant to the CEO and COO; one-time restricted stock unit (RSU) grant to other executive officers |
Fluidigm |
One-time RSU award to all executive officers, and to key management and critical employees |
Garrett Motion |
One-time cash awards to NEOs and key employees, with NEO awards ranging from $230K to $1.9M |
Sabre |
One-time RSU award to all executive officers |
WEX |
One-time business continuity awards to a broad group of employees: 25% in time-vested RSUs and 75% in PSUs based on relative total shareholder return |
Not all annual incentive or LTI actions require immediate disclosure through 8-K current reports with the Securities and Exchange Commission. Only material incentive amendments require disclosure. Companies besides those included in this document have no doubt made changes to annual and LTI plans, but the changes were not considered material and, therefore, were not disclosed.
CAP will continue to track and regularly publish corporate actions in response to the COVID-19 pandemic in CAP’s COVID-19 Resource Center, which also includes a searchable database of business actions related to COVID-19.
Please contact one of the following CAP consultants for more information:
Melissa Burek Partner
[email protected] 212-921-9354
Eric Hosken Partner
[email protected] 212-921-9363
Bonnie Schindler Principal
[email protected] 847-636-8919
Whitney Cook Senior Analyst
[email protected] 646-486-9748
Julia Long provided research assistance for this report.
This report examines 2019 compensation and financial performance across two segments of the insurance industry, including seventeen of the largest Property & Casualty (P&C) and Life & Health (L/H) Insurance companies. 2019 median revenue of these companies was approximately $22B. CAP focused on 2019 financial performance, CEO pay trends and current industry dynamics, including the impact of the COVID-19 pandemic.
Key Takeaways
2019 Pay and Performance. Bonus payouts for insurance company CEOs continued to be above target and commensurate with good financial results and strong total shareholder return in 2019.
Current Environment. 2020 started strong before the COVID-19 pandemic significantly impacted economies with stay at home orders and travel bans. Insurance companies were generally less impacted than other companies that had to take more extreme actions to stabilize business.
Looking Ahead. The COVID-19 pandemic is expected to result in changes in lifestyles and consumer behaviors. We do not believe this will lead to major overhauls in executive compensation programs among insurers. Most companies will make minor changes to their programs, and the primary focus will be on diminishing the impact of future uncertainties on compensation outcomes.
2019 Performance: Another Good Year
The insurance industry saw growth results generally similar to 2018. Companies in our study experienced 5% median revenue growth, coupled with 6% operating income growth in 2019. Median TSR was strong (+25%), a noticeable improvement from 2018; however, the sample did lag the median TSR of the S&P 500 companies of 30%.
The P&C industry generally experienced a better year than the L/H companies in our sample. Catastrophe (CAT) losses were down again in 2019, helping drive better performance. Operating income increased for all the P&C companies in the sample, with a median increase of 23% compared to 18% in 2018. CAT loss volatility continues to impact performance results for each company.
L/H company performance in terms of growth was consistent with the prior year, with a median revenue increase of 3.5% and operating income growth at 1.2%. Contrary to expectations for 2019, the industry experienced two interest rate decreases during the year, which depressed sales of certain products. Despite flat performance, TSR results were strong at +20% at median.
P&C Financial Performance
- Median revenue growth of 7.9% in 2019 was similar to 2018 median growth of 5.5%.
- Operating Income increased by 23% at median, higher growth compared to 2018.
- Similar to prior years, CAT losses had mixed impact on individual company results; CAT losses were down for all companies, nearly 40% at median.
- Median Operating ROE of 11.2% increased 0.9% compared to last year.
- Net Investment Income increased 11.2% at median, compared to 2018 growth of 4.5%.
L/H Financial Performance
- Revenue increased by 3.5% at median, similar to 2018.
- Operating income was flat compared to last year (+1.2%), a decline from 2018 growth at 18%.
- Median Operating ROE of 12.8% declined slightly from prior year.
|
Median Revenue Growth |
Median Op. Income Growth |
Median Op. ROE Improvement |
Median TSR |
Property & Casualty |
7.9% |
23.4% |
0.9% |
29.4% |
Life & Health |
3.5% |
1.2% |
-0.5% |
20.1% |
All Insurance |
5.1% |
6.0% |
0.3% |
25.1% |
2019 CEO Pay For Performance: Bonuses Pay Out Above Target
CEO Bonuses |
Median Annual Incentive Payouts (% of Target) |
Median Annual Incentive Payouts (% of Salary) |
||||
2019 |
2018 |
2017 |
2019 |
2018 |
2017 |
|
P&C (n=8) |
132% |
135% |
142% |
393% |
409% |
396% |
Life and Health (n=9) |
112% |
125% |
138% |
278% |
281% |
300% |
Total Sample (n=17) |
117% |
125% |
138% |
370% |
283% |
318% |
Executive bonus payments in the insurance industry were above target again in 2019, although to a lesser degree than 2018.
Property & Casualty: 2019 was another strong year for the P&C industry. All eight companies experienced positive operating income growth. Performance results for P&C companies resulted in CEO bonuses as percent of target for 2019 that were consistent with prior years. On a dollar value basis, bonus payouts increased by 5% year over year (driven by small increases in salaries and target bonus opportunities).
Life & Health: Modest revenue growth and flat operating income growth for 2019 resulted in reduced bonus payouts for 2019. While payouts are still above target, they were closer to target than in prior years, reflecting financial results.
2020 Developments and Expectations for 2021
This year, the COVID-19 pandemic has led to significant volatility in financial markets, hampered growth for many companies, and transformed social behaviors. This section assesses the impact to-date and future expectations for insurance industry executive compensation and performance.
S&P 500 Performance (through 5/31/2020). Year-to-date, the S&P 500 index has been volatile. Performance was strong before the COVID-19 pandemic disrupted the economy and financial markets. At its highest point on February 19, the index was up 4.8%. Just a little over a month later, on March 23, the index loss was 30.7% for the year. While certain industries were impacted more than others, all industries were down for the year. As the CARES (Coronavirus Aid, Relief, and Economic Security) Act agreement got closer to being passed, markets started rebounding late March. The act will ultimately inject over $2 trillion into the US economy. Despite record unemployment claims, the S&P 500 index recouped most of the losses by the end of May.
S&P 500 Insurance Sector TSR. Insurance companies in the S&P 500 index tracked the index at both the height of the market in February, and the bottom of the market on March 23. As the market began recouping losses, insurers recovered to a lesser degree than other industries. We believe this has been driven by investor sentiment on profitability expectations for insurers due to lower interest rates, increased short-term disability and mortality rates, and uncertainty around potential lawsuits related to business interruption.
|
2/19/2020 S&P 500 High |
3/23/2020 S&P 500 Low |
5/31/2020 |
S&P 500 Index |
4.8% |
-30.7% |
-5.8% |
Insurance Industry Group Median |
4.9% |
-38.2% |
-26.9% |
Insurance Industry Rank vs. Other Industry Groups |
6 of 24 |
13 of 24 |
19 of 24 |
COVID-19 Impact on Compensation. As it became apparent that the COVID-19 pandemic would have a more lasting impact on businesses, companies took significant actions to preserve liquidity and conserve costs. More than 200 companies in the S&P 500 have taken temporary compensation or human capital actions. The most prevalent action has been salary reductions for executives, with over 100 companies announcing such actions. The most impacted industries have been retail, consumer services and automotive.
The insurance industry has not been impacted as much as other industries that may have lost significant sources of revenue. As a result, we have seen very few insurance companies reduce compensation or significantly reduce the workforce on a temporary or permanent basis. Instead, many insurers, particularly P&C companies, have announced favorable actions directed at customers, including rebates on certain policies, suspension of policy cancellations for non-payment, and fee waivers for late payments, to help customers through the crisis and retain customer loyalty. Some companies also committed to no layoffs and expanded employee benefits, such as additional paid leave and travel reimbursements for essential employees.
Developments in the Insurance Industry. The impact of the COVID-19 pandemic has been far reaching, and it is unclear what the long-lasting behavior changes will be on daily lives, work habits, and consumer preferences. For insurance companies it will be important to correctly plan for such changes in order to respond with new products, adjust pricing of current products and maintain appropriate digital platforms, among other things.
For the P&C industry, one area of change will likely include revisions to workers compensation insurance and how it applies to the increasing number of telecommuters. Further, P&C insurers have already been impacted by pricing on auto insurance. Incident rates have currently declined as Americans stopped commuting to work and reduced leisure travel. It is not clear if this behavior will continue, or if we will see a surge in driving when COVID-19 is perceived to be more controlled. Enterprise cybersecurity is also becoming more important with millions working from home and creating needs in cyber liability insurance products. In Life and Health insurance companies, the extremely low interest rate environment has forced some insurers to make changes to product offerings, reprice products, turn away certain customers, and increase premiums. The fast pace of change in products is driven in part by increased demand in response to the COVID-19 pandemic. Some life insurers reported over a 20-30% jump in sales in the months of March or April, yet life insurers are also expecting increased claims (e.g., short-term disability and mortality claims) in the remainder of the year, which will put pressure on profitability.
Uncertainty in the industry is also coming from a potential issue around business interruption policies. Many property policies-in-force specifically exclude viruses. For those that do not, interpretation exists around the requirement for physical damage. There is increasing pressure suggesting that insurers may be expected to cover some of the loss from the pandemic, and pressure to retroactively change policies to cover such losses. Lawsuits have followed, with preliminary arguments favoring both sides of the issue. If insurers are ultimately required to change outstanding contracts, the financial impact on the industry could be significant.
2020 Performance Expectations. In light of the expected changes among P&C and Life Insurance companies, we expect financial performance in 2020 to be lower and impact compensation accordingly. Companies will likely pay below target incentives (with just a few falling below threshold and paying no incentives to executives and a few paying above target), yet performance and bonus payouts will vary significantly depending on the line of business.
We believe companies will adjust performance results for COVID-19 to varying degrees. Some will adjust for direct costs of COVID-19 if quantifiable. For example, if companies helped employees with costs of establishing home offices, those costs are easily identifiable and reasonable to exclude as unplanned costs. Some companies will take a more holistic assessment and consider not only financial performance but also how well the company and senior leadership responded in the crisis. It is fairly certain that Compensation Committees will use more discretion (if allowed under the plan) when determining current year bonuses. For long-term incentives, we do not expect many changes to performance goals on outstanding awards, yet some COVID-19 related adjustments to performance will likely be applied when performance periods are completed.
Implications on 2021 Executive Compensation. The COVID-19 pandemic will result in companies in most industries evaluating their incentive compensation plans to determine if any potential design changes should be made on a go forward basis, to ensure that the incentive plans continue to be relevant and motivational during the economic downturn and period of uncertainty. Some of the incentive design changes companies may consider, include:
Annual Incentive Plans |
Long-term Incentive Plans |
Use of wider performance scales around target goals, which may lead to less volatility in payouts |
Increased use of time-based restricted stock/units, given its certainty and retentive aspect |
Increased weighting on (or introduce) individual, strategic or ESG performance components |
Adopting relative performance measures (primarily TSR) or increasing the weight of relative measures |
Greater degree of (informed) discretion used in approving final payouts |
Potentially shorter performance periods for performance based LTI to de-risk the overall incentive program. In periods of uncertainty, a longer performance period exposes participants to greater risk of awards not being earned and makes goal setting more challenging. |
We do not expect insurance companies to make sweeping changes to their incentive programs due to the COVID-19 pandemic, yet companies will likely make some changes depending on the expected length and severity of the economic downturn. We anticipate that shareholders will look for parity in treatment between the broader population and executives. While shareholders may be understanding of the significant business impact related to COVID-19, we are confident they will still look for strong business rationale behind pay program decisions, even if original performance objectives have been reconstituted. As companies forge ahead through the challenges presented this year, we also believe it is a very opportunistic time to reassess programs and potentially redefine performance expectations and accountability at both the corporate and individual executive level.
For questions or more information, please contact:
Melissa Burek Partner
[email protected] 212-921-9354
Roman Beleuta Principal
[email protected] 646-532-5932
Joanna Czyzewski Senior Associate
[email protected] 646-486-9746
Brooke Warhurst provided research assistance for this report.
Insurance Sample for Pay for Performance Analysis:
P&C Companies
- Allstate Corporation
- American International Group, Inc.
- Assurant, Inc.
- Chubb Limited
- CNA Financial Corporation
- Hartford Financial Services Group
- Progressive Corp.
- Travelers Companies, Inc.
Life & Health Companies
- Aflac Incorporated
- Genworth Financial, Inc.
- Globe Life
- Lincoln National Corporation
- Manulife Financial Corporation
- MetLife, Inc.
- Principal Financial Group Inc.
- Prudential Financial, Inc.
- Unum Group
Compensation Advisory Partners (CAP) has summarized cash compensation reductions taken in response to the COVID-19 pandemic by oil & gas companies across multiple sectors.
Key takeaways of COVID-19 actions in the oil and gas industry include:
- About 25% of the companies reviewed have disclosed downward adjustments to annual incentive targets. Oilfield services & drilling companies are the most likely to have announced that they have cancelled the 2020 bonus program altogether.
- Similar to the broader market, most companies seem to have elected to let their pre-established metrics and actual performance levels produce a natural reduction in bonus payouts for 2020.
- Some companies are still considering the use of discretion and/or whether or not it would be appropriate to adjust performance measures at this point in the year.
We will continue to monitor corporate public announcements and it will be interesting to see if some of these reductions become permanent in an effort to “right size” compensation.
Partner Matt Vnuk and Principal Shaun Bisman discuss compensation-related actions taken by companies in response to COVID-19 and key considerations for boards and management in assessing outstanding incentive programs.