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Executives Worldwide Slash Their Own Pay in Coronavirus Crunch

March 12, 2020, 1:13 PM

From Dallas to Singapore and beyond, corporate managers are surrendering millions of dollars of compensation as anticipation builds that the worst is yet to come with the coronavirus.

Top executives and board members at more than 20 companies on four continents -- about half of them airlines -- agreed to cuts, freezes or forfeitures of salaries and bonuses in recent weeks. The tally also includes firms that handle airport baggage, organize trips and sell jewelry.

In some cases, the cuts were coupled with planned employee furloughs or broader payroll reductions. But other chief executive officers have trimmed their pay voluntarily in a show of solidarity -- moves that usually are mostly symbolic but could also presage more drastic measures.

“Whenever a CEO asks for concessions in times of financial strain, the first question is almost always: ‘Are you feeling the pain, too?’” said Michael Maslansky, CEO of communications advisory firm maslansky + partners. “The only way to make an employee-wide pay cut possible is if management leads by example.”

The virus outbreak, declared a pandemic Wednesday by the World Health Organization, has sickened at least 125,000 people globally and killed more than 4,600, forcing many companies to curtail or change operations.

United, Southwest

The reductions have been especially prominent among airlines, occurring even before President Donald Trump on Wednesday announced a 30-day restriction on travel to the U.S. from Europe -- a move that sent European airline and travel stocks to their lowest level since 2013.

Two weeks ago, Thai Airways said senior executives would voluntarily give up a quarter of their salaries for six months.

Others have followed with salary cuts or pay freezes, including El Al Israel Airlines, Singapore Airlines, Air New Zealand, Australia’s Qantas Airways, U.K.-based Virgin Atlantic, Sweden’s SAS and Cebu Air, the largest budget carrier in the Philippines.

In the U.S., the top two bosses at United Airlines will give up their salaries at least through midyear. At Dallas-based Southwest Airlines, CEO Gary Kelly will take a temporary cut of 10%. JetBlue Airways’ Robin Hayes will forfeit 20% of base pay.

Delta Air Lines didn’t immediately respond to emailed questions about whether CEO Ed Bastian has considered a reduction. A few years ago, American Airlines CEO Doug Parker elected to forgo salary and bonuses and instead gets paid solely in equity awards. Shares of American have tumbled 43% this year through Wednesday.

The concessions won’t have a major impact at most firms. Salaries make up only a fraction of compensation packages for U.S. executives at big public companies, with the rest coming as bonuses or equity awards. Corporate bosses abroad tend to get paid far less.

For example, the salary cuts for United’s Oscar Munoz and Scott Kirby will save the company less than $1 million, according to calculations by Bloomberg News. A 20% pay cut for SAS CEO Rickard Gustafson would save the firm roughly $260,000 annually. But some firms may elect to make deeper cuts if the situation worsens.

“Widespread cuts probably hurt people lower down in the organization more than the people at the top since a significant part of compensation at the top is comprised of incentives, which presumably are not cut,” said Robin Ferracone, CEO of executive-compensation advisory firm Farient Advisors.

‘Acutely Aware’

The virus has squeezed companies in many industries.

Singapore’s national postal service will cut and freeze pay for upper-level managers. Executive directors at Hong Kong-based jeweler Chow Tai Fook will take a 30% pay cut through April to ride out the difficult times along with their employees.

Australian travel agencies Helloworld Travel and Webjet will cut pay for their top leaders by as much as 30%, while other executives also will take reductions.

And senior leaders at two Singaporean companies that provide services like airport security and baggage handling -- Certis and Sats -- will absorb salary cuts of as much as 15%, Straits Times reported.

“CEOs are acutely aware of how the market and public react to their peers” who elect to reduce their pay, Maslansky said. “So when the first one goes, others quickly follow.”

At Anheuser-Busch InBev, CEO Carlos Brito last month was denied a bonus for the second half of 2019 after costs ate into the company’s profit growth and the coronavirus sapped demand for its beers in parts of China, where traffic to bars and nightclubs ground to a halt.

“If you own a bakery and don’t make any money one year, you don’t get a bonus -- this is the same thing,” Brito said at a news conference in Leuven, Belgium. “After a bad year, that’s when you see leaders rising to the occasion.”

--With assistance from Mary Schlangenstein, Cécile Daurat, Richard Clough and Susan Warren.

To contact the reporter on this story:
Anders Melin in New York at amelin3@bloomberg.net

To contact the editors responsible for this story:
Pierre Paulden at ppaulden@bloomberg.net

Peter Eichenbaum, Steven Crabill

© 2020 Bloomberg L.P. All rights reserved. Used with permission.

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