Tag: COVID-19

Covid-19: The Impact on Guidance, Buybacks and Dividends in the S&P 1500

Covid-19 has led to widespread changes to financial guidance, buyback programs and dividend payments across the whole of the US equity market, although notable differences exist between different market-cap segments, according to new research.

IR Magazine has worked with MyLogIQ, a provider of intelligence tools focused on compliance and disclosure, to understand how companies on the S&P Composite 1500 Index have responded to disruption caused by the pandemic.

To gather the data, MyLogIQ analyzed SEC filings of companies included in the S&P 1500, which accounts for around 90 percent of US market capitalization, between March 1 and June 12. The firm used its AI-based platform to search for concepts such as ‘withdrawing guidance’, ‘dividend suspension’ and ‘share-buyback pause’.

According to the analysis, 39 percent of S&P 1500 companies withdrew financial guidance during this period. Looking at the main market-cap segments of the S&P 1500, guidance was withdrawn by 47 percent of companies on the S&P 500, 35 percent of the S&P MidCap 400 Index and 34 percent of the S&P SmallCap 600 Index.

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.

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.

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

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.

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.