The global pandemic has been a “squandered chance to reform executive pay,” according to the editorial board of the
Financial Times. As we
noted last week, Say on Pay season has been intense this year, with nearly 20 S&P companies receiving less than 80% investor support and 9 failing to receive 50% support. The FT editorial claims to know the reason: boards have failed to properly structure executive compensation in the wake of the crisis.
The editorial skewers companies that adjusted outstanding equity plans during the pandemic along with almost any company that retroactively adjusted incentive plans, noting that “this should have been a moment to
re-examine and simplify pay.” The piece advocates for not adjusting for COVID-19 impacts and strongly implies that boards should actively rein in payouts if equity grants were made at the market’s pandemic low point. Yet, even the authors have to admit that “shareholders were happy to reward executives who proved their worth” since 90%+ votes were actually more common than last year.
The primary takeaway is that compensation adjustments to account for COVID-19 impacts, while often necessary, have carried the risk of burning the goodwill employees, shareholders, and the public had for company efforts during the depth of the crisis. However, this does little to acknowledge companies that saw exceptional performance through the pandemic and are facing serious retention concerns when executives aren’t able to be compensated for those achievements. The number of companies making such adjustments is only about 1 in 5, and by and large, shareholders have expressed approval for their adjustments. However, editorial pieces like this one underscore the fact that in the court of public opinion, nuance rarely matters.
