Category: WSJ

CEOs Start to Place Big Bets as Pandemic Grinds On

Plenty of CEOs remain stuck working from home and boards may still be meeting virtually, but companies are shifting their sights from surviving the coronavirus pandemic to charting new courses through it.

Verizon Communications Inc. is jumping into the low end of the wireless market. Clorox Co. directors picked their next leader. A railroad set a new profit goal for the year. New owners are taking Neiman Marcus out of bankruptcy.

That attitude is a change from earlier in the year, when most U.S. companies spent the first months of the pandemic hunkering down, slashing costs, hoarding cash and pulling their financial forecasts. As the coronavirus’s spread continues in the U.S. and abroad, businesses have concluded they’ll coexist with it for some time. So they are reviving stalled operational plans, changing leaders and reissuing financial targets.

Shareholders Feel Muted as Companies Switch to Virtual Annual Meetings

Companies are finding virtual shareholder meetings to be cheaper and less time-consuming, but shareholders complain they don’t get as much time to ask their questions.

A majority of the companies in the S&P 500 this year have decided to move their shareholder meeting—usually an in-person event—online due to coronavirus-related restrictions on large gatherings. Faced with the option to postpone the meeting until later, 87% of businesses opted for a virtual event compared with 23% of meetings held remotely in 2019, according to data provider MyLogIQ.

Executives and investors usually like that they can dial into these meetings from their homes. But despite the ease of access, shareholders say remote events offer less scope for participation as many companies ask for questions in advance, respond only to a select number of them and don’t disclose how many queries were received.

Finance Chiefs Are on the Move as Pandemic Adds Strain

Finance chiefs are changing jobs again after a slowdown in exits and recruitment in thespring, as the pandemic is forcing them to rethink their business models and adding to an already high workload.

Three big public companies this week said their CFO would exit. General Motors Co.’s Dhivya Suryadevara is joining Stripe Inc., while Kelly Kramer, the finance chief of Cisco Systems Inc., plans to retire. Avis Budget Group Inc. on Thursday said finance chief John F. North III would exit the company to pursue other interests.

The number of CFO departures at companies in the S&P 500 and Fortune 500 has crept up in recent weeks following a slowdown in the spring. Eighty finance chiefs left their positions through Aug. 1, compared with 84 at this point last year, according to the Crist|Kolder Volatility Report, which tracks recruitment trends in corporate leadership.

In total last year, 129 CFOs in the S&P 500 and Fortune 500 left their job, buoyed by a strong stock market that made equity compensation more attractive.

What Sets Some Companies Apart in the Current Crisis

As the downturn has affected a growing number of companies, it has become plain that “no one is immune” from letting workers go, in the words of Richard Florida, who teaches economic policy at the University of Toronto.

Yet as our most recent research shows, some companies are better inoculated than others from having to furlough or lay off people—namely, those that are most effectively managed.

Our findings are based on a statistical model that was created by the Drucker Institute and underlies the Management Top 250, an annual ranking produced in partnership with The Wall Street Journal. Rooted in the core principles of the late management scholar Peter Drucker, it assesses a company’s “effectiveness”—defined by Mr. Drucker as “doing the right things well.” The 2019 list was published in November.

In all, we examined 820 large, publicly traded companies last year through the lens of 34 indicators across five categories: customer satisfaction, employee engagement and development, innovation, social responsibility and financial strength.

Companies Choose Furloughs Over Layoffs to Manage Coronavirus Slowdown

When meat orders from restaurants, hotels and other food-service clients dried up at two of Hormel Foods Corp.’s plants in April, finance chief Jim Sheehan chose to furlough roughly 350 workers, but didn’t lay them off. These furloughed employees didn’t receive pay but got benefits such as health care.

It was a careful calculus. After years of effort to secure talent in a tight labor market, many finance chiefs responding to the shock of the coronavirus pandemic have so far preferred to furlough workers instead of severing ties completely, even if it means spending a little more.

“Our employees are long-term investments for us and they’re a precious resource, so we needed to do what we could,” Mr. Sheehan said.

Other finance chiefs made a similar choice as the coronavirus pandemic shut down businesses across the country. Of the 87 firms in the S&P 500 to announce staff reductions from early March through the end of June, 65 chose to furlough workers, according to an analysis of securities filings by data provider MyLogIQ.

Coronavirus Crisis Dents Salaries, Not Stock Awards, for Many CEOs

Hundreds of U.S. companies reduced salaries for their chief executives as the coronavirus pandemic swept across American business, a reversal for a group of leaders that until this year has ridden a bull market to record compensation.

Big-company CEOs had their richest paydays ever in 2019, a Wall Street Journal analysis shows. But in March and April many took large cuts to their salaries after the deadly virus crippled global commerce. For 2020, few so far changed the equity awards that make up the bulk of executive compensation and the value of which is tied to the stock market.

Unlike prior years, now “the question is not how much of an increase are we giving over the normal salary; it’s when do we even restore the old salaries,” said Robin Ferracone, CEO of compensation consulting firm Farient Advisors LLC.

One reason corporate boards have been slow to make bigger compensation changes: uncertainty over how long the economic slowdown will last, what its ultimate repercussions will be and how investors will react. After plunging, the stock market has rebounded from its March lows.

Coronavirus Crimps Some CEO Salaries but Not All

Cheesecake Factory Inc. furloughed about 41,000 hourly restaurant workers to conserve cash in the coronavirus pandemic. It also cut pay for other employees by as much 20%—a reduction that Chief Executive David Overton matched for his $995,000 salary.

At Yum Brands Inc., Chief Executive David Gibbs is forgoing his $1.2 million salary for the rest of this year, using the money in part to pay one-time $1,000 bonuses to managers of company-owned restaurants in its KFC, Pizza Hut, Taco Bell and The Habit Burger Grill chains.

As corporate America reels from the pandemic, senior executives are taking markedly different approaches to sharing the economic pain suffered by employees, a review by The Wall Street Journal found.

Chief executives at 184 companies within the S&P Composite 1500, comprising the biggest public corporations, have announced temporary reductions in their salaries, ranging from 10% to 100%, with a median cut of 50%, according to the Journal’s analysis of data from research firm MyLogIQ and securities filings. Of the 106 companies that have reported furloughing employees, 17 haven’t announced CEO salary reductions, the analysis found.

How Coronavirus Spread Through Corporate America

With the first quarter in the books, big companies are preparing to disclose to investors early indications of the economic toll of the coronavirus pandemic. The respiratory illness has shut down many parts of the U.S. economy, spurring a wave of layoffs and furloughs that resulted in a record 17 million unemployment claims in a span of three weeks. It also set off a scramble by companies to conserve cash.

The Wall Street Journal, with help from data tracker MyLogIQ, analyzed public filings for companies in the S&P Composite 1500 Index—which covers about 90% of U.S. market capitalization—to assess the impact thus far. Among the findings: Almost 300 companies withdrew their financial guidance. About 175 companies suspended stock buybacks or cut their dividend. One hundred firms that together employ some three million people said they would furlough workers.

FORECAST PROFIT

Hundreds of companies in the S&P 1500 withdrew their previously issued full-year guidance, citing Covid-19 as the catalyst. Airlines were among the first, though retailers now account for about a quarter of the 295 companies that pulled their profit or sales forecasts as of April 10.