Even CEOs are starting to get squeezed by the economic realities of this pandemic.
But compared to their employees, a growing number of critics still say it’s not nearly enough.
So far, top executives of many major U.S. corporations — including some at the very epicenter of the crisis — have mostly held on to their outsize pay packages after giving up some of their salaries. And even as rank-and-file jobs vanish, some still have a distant shot at collecting bonuses for 2020, albeit smaller than last year’s.
How things play out will depend on the economy, financial markets and ultimately the coronavirus itself. But as the pain grows for ordinary workers, executive pay — a divisive issue in an age of extraordinary inequality — has come to the fore once again.
Consider, for example, Tenet Healthcare Corp., which has furloughed thousands in the wake of the coronavirus. Chief Executive Officer
Yet even after the pay cut, Rittenmeyer will still rake in over a million dollars in salary. That’s not counting at least a $875,000 bonus, stock awards worth $11.3 million through 2022 and a contract that entitles him to millions of dollars more in the future. Total compensation figures have yet to be finalized for the current year, but the $390,000 that Rittenmeyer is forgoing would only amount to 2% of what he received last year.
What’s more, Tenet still pays Rittenmeyer’s predecessor, who left three years ago, roughly $245,000 each month as part of his severance package.
It’s little wonder one of the largest U.S. unions criticized Tenet’s executive pay and said Rittenmeyer’s donation amounted to little more than “a gesture.”
A Tenet spokesman said executive-pay decisions were made before the outbreak and payouts are tied to long-term goals. He added the furloughs were carried out to focus resources on Covid-19 care and some employees are back on the job.
Rittenmeyer, who declined to be interviewed, isn’t the only CEO facing scrutiny. Grocery store chain Kroger Co., under fire from employees and unions over its plan to scrap its extra $2 per hour in hazard pay this weekend, disclosed that CEO
A Kroger spokeswoman pointed out the company’s average wage is $15 an hour and that it offers a range of safety precautions, from testing to emergency leave, to employees.
All across the country, as millions of Americans are thrown out of work, tough questions are once again being asked about executive pay.
Airlines like United Airlines Holdings Inc. and
On one hand, the moves are a conscious, if symbolic, display of solidarity and shared sacrifice, an effort by the bosses not to appear
“If you’re going to ask your staff to give up salary, so should you,” said
CEOs at S&P 500 companies receive on average $1.3 million in salary, roughly 20 times the median U.S. household income. But that sum only accounts for 10% of their total compensation. The rest comes in bonuses and stock-based incentives typically tied to measures like equity returns or profits. Those payouts are adjusted based on how goals are met.
For many executives in the hardest-hit industries, that means making do with perhaps $1 million instead of $10 million. But others still have a shot at hefty payouts, regardless of cuts to base pay, if stocks recover.
Of course, the stock market isn’t the economy. But it can often magnify and distort — in a fun-house mirror sort of way — the winners and losers in it.
After plummeting in March, stocks last month jumped the most since 1987. The rebound came as U.S. companies
And as the post-crisis years showed, the market tends to reward capital over labor. In the past decade, public-company executives have reaped billions of dollars in gains from stock-based awards, some of which were granted at the depths of the Great Recession, while millions of people have struggled for years to regain their footing.
“There’s just the general view that we need to pay attention to all stakeholders,” said
It’s part of a longer-term trend. Chief executives at the largest U.S. companies saw their pay skyrocket 940% between 1978 and 2018, a study showed last year, largely helped by stock gains. Worker wages, meanwhile, increased by just 12%.
In some instances, hefty stock awards have arguably made sharing the pain an exercise in virtue signaling. In April,
However, Aon still will pay about $100 million in dividends to shareholders on May 15. Like many other CEOs, Case has amassed a sizable ownership stake since he started in 2005, roughly 1.2 million shares. His cut of the quarterly payout — about $531,000 — will more than make up his lost salary.
Other employees who hold shares will benefit, too. But unlike Case, few also have tens of millions of dollars in unvested stock awards outstanding.
Aon declined to comment beyond Case’s open letter to employees. In it, Case wrote “paying a regular dividend is consistent with maintaining an investment grade rating and fundamental to accessing the capital markets.”
The pandemic has also brought into stark relief the lucrative golden parachutes given to corporate executives. In March,
MGM didn’t directly address the exit package but said at the time that the board sped up the transition, announced the prior month, because it “believes continued steady, skilled leadership is needed in this time of great upheaval and uncertainty.”
Whatever the case, companies must weigh past promises against public perception, says Aalap Shah, a partner at Pearl Meyer, an executive-pay consulting firm.
“If you don’t react in a way of camaraderie,” he said, “that’s going to be very telling about the kind of company you are.”
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