Category: WSJ

CEO Pay Surged in a Year of Upheaval and Leadership Challenges

CEO pay surged in 2020, a year of historic business upheaval, a wrenching labor market for many workers and unprecedented challenges for many leaders.

Median pay for the chief executives of more than 300 of the biggest U.S. public companies reached $13.7 million last year, up from $12.8 million for the same companies a year earlier and on track for a record, according to a Wall Street Journal analysis.

Pay kept climbing in 2020 as some companies moved performance targets or modified pay structures in response to the Covid-19 pandemic and accompanying economic pain. Salary cuts CEOs took at the depths of the crisis had little effect. The stock market’s rebound boosted what top executives took home because much of their compensation comes in the form of equity.

…Pay rose for 206 of the 322 CEOs in the Journal’s analysis, which uses data for S&P 500 companies from research firm MyLogIQ.

Meet the Highest Paid CEO in S&P 500, Paycom’s $211 Million Man

Move over, Elon Musk and Tim Cook. There is a new name breaking into the list of the highest-paid chief executives: Chad Richison, the founder and CEO of payroll processor Paycom Software Inc.

The Oklahoma City billionaire last year was awarded compensation valued at $211 million by Paycom, the company disclosed in the annual proxy statement it filed with the Securities and Exchange Commission last week.

Mr. Richison’s 2020 compensation was worth closer to $702 million, based on the value of the shares underlying the equity awards, according to an independent calculation by ISS ESG, an arm of proxy advisory firm Institutional Shareholder Services.

The 50-year-old executive started the software company in 1998 and has run it since. He is Paycom’s largest shareholder, with a stake worth $3.2 billion. A surge in the stock price landed Mr. Richison on the billionaires list kept by Forbes magazine. Late last year, he signed the Giving Pledge created by Bill Gates and Warren Buffett, publicly promising to give away at least half his wealth.

…His 2020 compensation package makes Mr. Richison the highest paid CEO in the S&P 500 based on disclosures so far, according to research firm MyLogIQ. It is one of the five biggest CEO awards since at least 2010, according to MyLogIQ data.

Companies Offer Investors a Glimpse at Employee Turnover

U.S. companies are sharing more details about employee turnover as part of new disclosure requirements. But for some investors, the effort doesn’t go far enough because finance chiefs handpick the information they provide.

Workforce spending is usually the biggest expense for companies, making up on average 57% of total operating costs for S&P 500 companies, according to MyLogIQ, a data provider. Turnover rates, which cover voluntary exits as well as layoffs, often indicate to shareholders how well managed a business is.

U.S. businesses slashed 41 million jobs in 2020, compared with 21.7 million cut the previous year, according to the Bureau of Labor Statistics. It isn’t clear how many of those will come back once the pandemic abates.

Why Finance Executives Rely on Supply-Chain Finance: A Guide to the Financing Tool

The struggles of Greensill Capital have shone a light on the increasing use of supply-chain financing, a tool that gives companies the ability to extend their payment terms to vendors.

Regulators and standard-setters are closely watching if and how companies disclose their use of the financing tool, which has come into focus amid the recent problems seen at Greensill, a major provider of supply-chain finance. The firm filed for insolvency earlier this month and is facing regulatory scrutiny.

How Does Supply-Chain Finance Work?

As part of a supply-chain finance agreement, banks provide funding to pay a company’s supplier of goods and services. The supplier is then paid earlier—but less—than it would be paid without the agreement.

…It is unclear how many companies have supply-chain finance programs. Twenty-seven companies in the S&P 500 disclosed in their 2020 annual reports they are using the tool, up from 13 the previous year, according to data provider MyLogIQ.

Companies Put the Best Face on Covid-19’s Financial Impact

After its business was hit by the pandemic, retailer Ulta Beauty Inc. ULTA -0.82% appears to have used some accounting cosmetics to add a gloss to its financial results.

Operating income at the once-fast-growing chain, which temporarily closed stores during the health crisis, plummeted to $13 million for the nine months through October, a fraction of the $613 million earned in the same period in 2019. Two coronavirus-related items affected the math: a $40 million impairment charge for the value of some stores that reduced the operating income, and $51 million of federal tax credits that increased it.

Ulta also reported a much healthier $98 million “adjusted operating income.” This tally, designed to strip out one-time items, added back the $40 million impairment cost, which boosted the adjusted number, but didn’t take off the $51 million of federal aid. If that aid had been removed, the adjusted-operating-income number would have been half of what the company reported.

…Roughly one-quarter of S&P 500 companies last year reported an adjusted figure for earnings before interest, tax, depreciation and amortization, or Ebitda. But only about one in 10 of those companies disclosed adjusted Ebitda because of Covid-19 during the three quarters through December 2020, according to data provider MyLogIQ.

More Finance Chiefs Resigned in 2020 Than in Previous Years

More chief financial officers resigned from large U.S. companies in 2020 than in previous years, as the pandemic put pressure on corporate balance sheets and the executives who manage them.

Thirty-seven companies in the S&P 500, including General Motors Co. and HP Inc., last year said that their CFOs would quit, up 27.6% from 2019. The figure for 2020 is higher than the average number of resignations over the past decade, which totaled about 25 a year, according to data provider MyLogIQ. Resignations are typically voluntary, as opposed to terminations, but the language in corporate filings can sometimes be ambiguous.

That is contrary to what recruiters had expected in the early days of the pandemic—some predicted executives would stay put—and comes after years of heated competition for finance talent.

For many CFOs, the pandemic added to an already high workload and long hours. Their roles have become more central in recent years, as finance chiefs, the right hand to their chief executives, often not only manage the books, but also their company’s strategy.

U.S. Companies Revamp Bonus Plans as Pandemic Upends Forecasts

Companies are revising their plans for bonuses and other incentive compensation as the coronavirus pandemic upended financial forecasts and executives managed through a once-in-a-lifetime economic downturn.

The pandemic has had a disparate effect on companies’ balance sheets, leading to soaring profits in some industries, such as online retail and groceries, and steep losses in others, for example hospitality and travel.

Over a quarter of large U.S. businesses initially reduced executive salaries in the spring, according to Equilar Inc., a data provider. The cuts, at companies including Walt Disney Co. , General Motors Co. and United Airlines Holdings Inc., marked a reversal following several years of wage increases in the C-suite. But they were temporary, as many companies restored manager salaries in recent months.

Now, as companies are getting ready to pay out bonuses and other rewards for the past year, boards are contemplating whether it makes sense to assess executives based on goals and targets that were put in place in late 2019 and early 2020, when the outlook for their business was very different.

…Short-term incentives for senior executives at companies in the S&P 500 were mostly on the rise before the pandemic, according to data provider MyLogIQ.

Why Are There Still So Few Black CEOs?

If corporate life is a pyramid, for Black Americans, it is one with the steepest of peaks.

Out of the chief executives running America’s top 500 companies, just 1%, or four, are Black. The numbers aren’t much better on the rungs of the ladder leading to that role. Among all U.S. companies with 100 or more employees, Black people hold just 3% of executive or senior-level roles, according to Equal Employment Opportunity Commission data.

Decades after the civil-rights movement led to laws banning workplace discrimination, progress for Black executives has hit a ceiling.

“Opportunity is not equally distributed,” says Ron Williams, the Black former CEO of Aetna who has served on 14 boards over his career and currently sits on the boards of Boeing Co. and American Express Co. Too many promotions in companies are informally decided before jobs are ever posted, leaving Black people and more marginalized talent without the chance to compete, he says. “People don’t get the chance to work their way into a position where they are a reasonable candidate for a role,” he says.

…The ranks of Black chief executives have stayed low even as other ethnic minorities have seen greater, albeit still limited, advancement. Among CEOs of S&P 500 companies, 11% are ethnic minorities. Of the total, 3% are Latino, 3% are Indian, 2% are Asian, 1% are Middle Eastern and 1% are multiracial. Just 1% are Black, according to an analysis by MyLogIQ, a data tracker. Black people make up about 13% of the U.S. population.