Chief executive officers at S&P 500 companies that get government aid for coping with the coronavirus pandemic could face a pay cut as small as thousands of dollars or as big as tens of millions, depending on how much they make.
The U.S. stimulus package signed into law last month limits total compensation to $3 million plus half of anything over that amount for CEOs and other top executives at companies taking government money. The $3 million threshold would likely cover most of the S&P 500 index, Bloomberg data show.
For a typical CEO, the median pay cut could total $4 million, according to an analysis of Bloomberg data for 2018, the most recent year for which totals are available.
Some executives in industries impacted by the virus are voluntarily slashing their own pay. That includes airline CEOs such as Delta Airlines Inc.'s Ed Bastian and United Airlines Holdings Inc.'s Oscar Munoz, who are skipping salaries as their industry deals with a drop in travel.
American Airlines Group Inc. CEO Doug Parker already takes no salary, since he decided to forgo it and cash bonuses a few years ago. He’s paid in stock instead, and could see the $12 million he made in 2018 cut down to $7.5 million under the rules of the aid package.
Executive pay cuts can help companies conserve cash while showing solidarity with workers losing out on pay. But they aren’t enough for some groups like the progressive Institute for Policy Studies. Sarah Anderson, who leads the institute’s studies on executive pay, said taxpayers shouldn’t “subsidize” million-dollar executive paychecks through government aid. Anderson supported a proposal floated by Democratic lawmakers that would have limited CEO pay to no more than 50 times their median worker’s pay.
The coronavirus aid package also puts pay caps on executives or other employees making between $425,000 and $3 million in 2019.
“That’s going to pick up a lot of people for larger companies,” said Todd Sirras, managing director at pay consultant Semler Brossy.
The response to the virus so far echoes government scrutiny on executive pay in the wake of the 2008 financial crisis.
American International Group Inc., General Motors Corp., and five other companies that got significant assistance from taxpayers after the 2008 financial crisis were told to cap their executives’ annual salaries at $500,000 and limit their ability to cash in on stock grants until after relief funds were repaid. A federal watchdog found afterwards that the restrictions failed to rein in executive pay, in part because of pressure from companies to pay executives enough to keep them from quitting.
Then, big banks were blamed for the crisis and stock granted as part of CEO pay was seen as contributing to risk-taking. Today, it’s hard to assign blame for a virus, according to Deb Lifshey, managing director at executive pay consultant Pearl Meyer.
“There was a lot of finger pointing after the financial meltdown,” Lifshey said. “Here no one’s really finger pointing.”
—With assistance from Alicia Ritcey