Category: Agenda

Pandemic Prompts Review of Jet Travel

While many executives continue to work from home, data shows that travel by corporate aircraft and chartered and fractionally owned jet fleets has begun to take off in recent weeks. That trend is likely to continue through 2020 as companies seek to reduce the risk of CEOs’ being exposed to the coronavirus. Accordingly, sources say boards should take a renewed look at corporate aircraft and private jet travel policies.

Meanwhile, the SEC has spent the past several years pursuing enforcement actions stemming from the improper disclosure of executives’ personal use of corporate aircraft, as Agenda has reported, creating a dynamic governance issue that is ripe for scrutiny.

“There has been a lot of pressure in recent years to keep [aircraft perquisite] figures down, so this is a perk that over the years has been in decline, along with country clubs and other things,” says Alan Johnson, CEO of compensation consulting firm Johnson Associates. “But I think the long-lasting implications of the pandemic are going to change everything. There’s business use of the planes, which is going to accelerate dramatically because there are fewer commercial flights … this is a different world.”

CFO Pay Rises as Responsibilities Expand

CFOs saw an increase in pay last year as responsibilities for non-financial issues, including operations and strategy, expanded, sources say. Moreover, the Covid-19 pandemic is driving a redoubled focus on operations and emergency planning from CFOs, and some companies are bringing in battle-hardened finance veterans to tackle the issues related to the crisis.

However, it remains unclear how 2020 will unfold in terms of compensation for CFOs, who are shouldering much of the workload in managing liquidity and capital allocation. Annual bonuses will likely decrease more dramatically in the future as the 2020 pandemic roils company financials, sources say.

“We expect a lot of companies are probably going to have lower bonuses again next year on the equity side; however, we will have to wait and see because most companies granted equity before the pandemic impact really started for calendar-year companies,” says Roman Beleuta, principal at Compensation Advisory Partners.

Investors Put a Microscope on Pay Problems

Companies including Altria Group, CVS Health and Intel are the latest to have failed say on pay so far this proxy season, as investors zero in on longtime compensation issues that have been magnified by the coronavirus pandemic.

Indeed, investors are carefully scrutinizing how pay, strategy and performance will align to weather the storm. Shareholders may react to perceived failings on issues such as employee health and safety by voting against pay to send a strong message, sources say.

Additionally, traditional pain points for investors, such as one-time awards and lack of pay-for-performance alignment, are driving negative vote campaigns that have led to weak say-on-pay vote results for some companies this year.

Investors Probe Companies on Covid-19 Transition Plans

Investors are pushing companies to address things like hazard pay and whether temporary policies and practices related to employees need to stay in place as businesses transition out of the depth of the pandemic.

Yesterday, New York City comptroller Scott Stringer sent a letter to the Amazon board’s leadership development and compensation committee asking chair Judith McGrath to address at its upcoming annual meeting scheduled for May 27 “media reports regarding widespread Covid-19 health and safety concerns among Amazon employees, including reports that the company has retaliated against some employees and is pressuring sick employees to come to work.”

“While Amazon management has announced numerous initiatives to keep their employees safe, the onus is on the independent members of the Amazon Board of Directors to report on how they are overseeing the progress of these initiatives and to ensure that these investments produce outcomes beneficial for both employees and shareowners,” the letter states. It asks the board to report to investors on the impacts and outcomes of the steps the company says it has taken to protect employees, including volume trends in Coronavirus cases among employees, days lost due to Covid-related illnesses and complaints filed with the Occupational Safety and Health Administration. The letter also asks for the frequency of committee meetings during the pandemic, noting that it has only met three times per year each year for the past five years. Other boards are likely to see similar versions of this letter from investors, if they haven’t already.

Pandemic Response by the Numbers

According to a review of SEC filings by S&P 500 companies by MyLogIQ, as of May 11:

  • 273 S&P 500 companies have switched to virtual meetings
  • 146 S&P 500 companies have suspended share buybacks
  • 50 S&P 500 companies have suspended or cut dividends
  • 37 S&P 500 companies have instituted job freezes
  • 91 S&P 500 companies have cut executive compensation
  • 60 S&P 500 companies have added paid sick leave or more employee benefits
  • 231 S&P 500 companies have suspended guidance
  • 72 S&P 500 companies have instituted worker furloughs or layoffs

Here are a few examples of the types of disclosures companies are making on their pandemic response.

Pandemic Response by the Numbers

According to a review of SEC filings by S&P 500 companies by MyLogIQ, as of May 4:

  • 264 S&P 500 companies have switched to virtual meetings
  • 113 S&P 500 companies have suspended share buybacks
  • 42 S&P 500 companies have suspended or cut dividends
  • 28 S&P 500 companies have instituted job freezes
  • 83 S&P 500 companies have cut executive compensation
  • 50 S&P 500 companies have added paid sick leave or more employee benefits
  • 200 S&P 500 companies have suspended guidance
  • 57 S&P 500 companies have instituted worker furloughs or layoffs

 

Here are a few examples of the types of disclosures companies are making on their pandemic response

Investors May Retaliate If ‘Silenced’ at Virtual Meetings

As companies revamp annual meeting formats in light of the Covid-19 pandemic, investors and governance experts are warning boards that if investors perceive that the shift to virtual meetings is limiting shareholder rights, they will retaliate next year.

According to a review of SEC filings by S&P 500 companies by public company intelligence provider MyLogIQ, as of April 27, 260 S&P 500 companies had disclosed plans to switch to virtual meetings, and more will likely do so, sources say. However, investors say some companies are not allowing proponents to present their own proposals at meetings, limiting shareholder question-and-answer sessions and building in other mechanisms that give companies more control over the meeting, to investors’ ire.

In fact, some sources say investors may vote against board directors or other management recommendations during next year’s proxy season if companies limit rights this year. Accordingly, directors should ensure that they are available in the meetings and that management is allowing time for shareholders to raise concerns and explain proposals, sources say.

Pandemic Response by the Numbers

According to a review of SEC filings by S&P 500 companies by MyLogIQ, as of April 27:

  • 113 S&P 500 companies have switched to virtual meetings
  • 65 S&P 500 companies have suspended share buybacks
  • 25 S&P 500 companies have suspended dividends
  • 17 S&P 500 companies have instituted job freezes
  • 69 S&P 500 companies have cut executive compensation
  • 31 S&P 500 companies have added paid sick leave or more employee benefits
  • 143 S&P 500 companies have suspended guidance
  • 30 S&P 500 companies have instituted worker furloughs or layoffs.