WORKSPAN DAILY |
Many Companies Still Moving Forward with Director Pay Plans
The COVID-19 pandemic has led many executives to voluntarily take pay cuts or forego their 2020 salary altogether to help keep operations afloat. Many companies, however, are holding firm with their director pay.
This is according to a survey by executive compensation consultancy Pearl Meyer, which found that more than half (55%) of the 315 organizations surveyed are moving forward with their director pay as planned.
On the flip side, 19% of companies reported that they have made temporary cuts to director pay, while 17% intend to move ahead with proposed director pay increases. Only 14% of respondents appear to be further evaluating the effect of the pandemic and are still considering changes to director pay.
“Not surprisingly, our survey found the majority of director pay cuts thus far are in industries most impacted by COVID-19 such as energy, transportation and hospitality,” said Jannice Koors, senior managing director and Western region president at Pearl Meyer. “However, as the economic uncertainty and fallout continues, we could see changes to director pay extend to other industries. Companies need to plan for the future, and boards may consider actions to manage cash, contain costs and acknowledge the economic hardship felt by their key stakeholders.”
Among companies that have cut director pay in response to COVID-19, 40% said they did not know how long the adjustments would last. Companies that have an anticipated timeline typically think the adjustments will last longer than three months, but less than one year (38%). Because of the uncertainty associated with the pandemic, 70% of respondents are still unsure if the initial adjustment period will need to be extended.
The survey also found that nearly half (48%) of companies have no plans to make any changes to their annual director equity grant value or methodology.
Among companies that intend to adjust this year’s director equity grants, the most common approaches are to modify the share price used to determine the number of shares (9%) or to decrease the equity grant by the same amount as the annual cash retainer (4%). The survey found that 20% are still deciding if they will adjust equity grants in light of COVID-19.