Category: Agenda

The Largest Equity Grants of 2020

A year that included both a market recession and a rebound, 2020 saw equity compensation for named executive officers increase by 3.7% at companies in the S&P 500, according to data from public company intelligence provider MyLogIQ.

While median equity comp was up for executives in 2020, financial performance was not. At S&P 500 companies, the median revenue shrank by 0.7% in 2020 compared with 2019, according to data from Farient Advisors. Median earnings per share at S&P 500 companies also decreased in 2020, down 1.3% from 2019, said Eric Hoffman, vice president and leader of information services at Farient.

Nonetheless, Hoffman said he expects equity grants for this year and 2022 to fall in line with the increases of the last several years as companies do their best to retain talent.

Jet Perks Decline in a Year Marked by Travel Lockdowns

Jet perquisite spending reached a three-year low last year as top employees sheltered in place due to the Covid-19 pandemic. S&P 500 companies spent $93,071 on average per company on jet perks for top executives in 2020, down from $116,805 in 2019 and $115,729 in 2018, according to data from public company intelligence provider MyLogIQ.

“Companies took the tack of traveling less due to the personal health risk that might be involved in sending employees all over the world, but worker compensation and reputational risk also played into the decision to curtail jet use,” said Erik Nelson, director of executive compensation at Willis Towers Watson.

However, some companies opted to use corporate aircraft more frequently to fly executives to business-critical meetings while others extended corporate jet use permissions to directors and executives who didn’t previously have access for safety reasons, filings show. Other companies prohibited personal use of the corporate jet in 2020, opting to save trips for business purposes only.

Sources said the pandemic opened the door for compensation committees to reevaluate the need for corporate jet travel — how often and who uses the jet and how much the board should allow executives to spend on personal and business flights using the company’s aircraft.

Burnout Hits CFOs as Boards Grapple With Departures

Chances are the executive who serves as the right hand to the CEO and key liaison to the audit committee is considering their options, experts say. The Covid-19 pandemic and increased pressure to balance strategic issues such as environmental, social and governance factors with careful capital allocation, growth opportunities and liquidity management is increasingly driving companies to consider replacing first-time or untested CFOs with seasoned executives who can navigate an uncertain and evolving business environment.

The result?

A CFO market that is “red hot and will continue to be for the foreseeable future,” said Cathy Logue, managing director at executive search and consulting firm Stanton Chase’s Toronto office.

The Largest Executive Cash Payments of 2020

Last year was an unusual one for executive pay as the impact of the Covid-19 pandemic upended boards’ best-laid plans.

Many companies publicized decisions to cut executive salaries to show solidarity with laid-off or furloughed employees, while others converted cash payments to equity to preserve liquidity. Year over year, average cash compensation for S&P 500 execs was down 2%, according to data from public company intelligence provider MyLogIQ.

But not for everyone. In some cases, the turmoil wrought by Covid resulted in large cash payments to executives in the form of severance pay, conversions from equity to cash, retention bonuses and other comp vehicles. While many boards may have expected compensation practices to return to normal for 2021, it’s unclear whether the pandemic has truly subsided; the need to tap into otherwise unusual pay methods may not be in the rearview mirror yet.

 

Salaries Stayed Mostly Level During Pandemic: Study

The Covid-19 crisis wreaked havoc on the global economy, disrupted supply chains and cost millions of people their jobs. But for those who remained employed throughout the pandemic, their salaries remained largely unaffected by the Great Disrupter of 2020.

According to The Wall Street Journal, the median pay at more than 30% of companies listed on the S&P 500 fluctuated by 5% or less. Meanwhile, the median pay increased by more than 5% at 184 companies and fell by more than 5% at 125 others.

The Journal analyzed pay at 492 companies using regulatory disclosures and data provided by public-company intelligence provider MyLogIQ and found that about 140 companies said their median worker earned $100,000 in 2020, while nearly 50 reported their median worker earned below $30,000. Among the companies whose median worker made more than $100,000 were Netflix and CSX Corp. The companies paying their median worker less than $30,000 were Starbucks and Amazon. The paper noted that the numbers at all four companies were similar to those reported in 2019.

Investors Probe Employee Engagement Data

As boards delve deeper into human capital oversight, employee engagement data is becoming more pertinent to directors and other senior leaders, sources say. Frequent surveys on specific engagement problem areas have replaced long, drawn-out annual employee surveys, and human resources leaders are reporting the findings up to the board as they monitor issues such as corporate culture and employee mental health.

“Employee engagement is front and center for companies right now,” says Rebecca Ray, executive vice president of human capital at The Conference Board. “I think a lot of senior leaders are rightfully concerned about how to preserve the best parts of their culture. As they look at whatever life-changing event might be now thrown at you, there may need to be conversations about what is the best part of our culture, and one of the ways you can gauge that is by having a lot of conversations at the grass root [employee] level.”

Indeed, there were 200 mentions of employee engagement in SEC filings from S&P 500 companies between April 30, 2020, and April 30, 2021, according to data provided to Agenda from public company intelligence provider MyLogIQ.

Scant Diversity Data in Human Capital Disclosures

Mentions of diversity are featuring prominently in companies’ human capital disclosures this proxy season; however, most companies are staying mum on the numbers. An analysis of 10-Ks filed by big companies by mid-April shows that only about a third disclosed any workplace demographic data on race and ethnicity. Fewer still broke the data out into specific demographic groups.

The new human capital management disclosure requirement was introduced by the Securities and Exchange Commission for the 2021 proxy season and requires companies to disclose material factors related to the management of the workforce. However, the SEC provided little guidance on what exactly companies should disclose, leaving it up to them to determine what would be material to investors.

Thus, the type of information disclosed so far varies widely. Some commonly included fields were global head count, regional representation of employees, employment contract type, collective bargaining agreements, staff turnover, components of employee compensation and wellness initiatives, among others.

…But only 35% of the companies disclosed data on racial and ethnic demographics according to an analysis of data from public company intelligence provider MyLogIQ.

CEO Pay Seesaws Under Pandemic Pressure

…Meanwhile, say-on-pay support has declined somewhat in the first three months of this year so far compared to 2020. According to data from compensation consulting firm Farient Advisors’ say-on-pay tracker and public company intelligence provider MyLogIQ, average say-on-pay support at S&P 500 annual meetings reported through March 23 was 84.6%. Last year through March 23, say-on-pay support for the S&P 500 was 89.3%. Only two S&P 500 companies, The Walt Disney Company and Qualcomm, had received less than 80% support by this time in 2020. By contrast, this year five companies — AmerisourceBergen; Beckton, Dickinson and Company; Disney; D.R. Horton; and Hologic — received less than 80% support on meeting results reported by March 23.

Peek says companies’ proxy disclosures this year are going to be critical, particularly for companies in the group strongly affected by the COVID-19 pandemic that may have used upward discretion on incentives.

“There are companies out there that made discretionary adjustments that went above target and in their proxies. They talk about the things they had to put on hold and the things they did for their communities, and that helps tell the story,” she says.