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Organizations Are Tracking How COVID-19 Could Impact Exec Pay Practices

The coronavirus outbreak has affected many different variables of business, and executive pay isn’t exempt from the situation.

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The boards of directors at 95% of companies have discussed the issue or will discuss it at an upcoming meeting, according to a Pearl Meyer survey of 233 organizations.

“Boards are laser-focused on the impact of COVID-19 on annual and long-term incentive plans,” said Peter Lupo, senior managing director and Atlantic region head at Pearl Meyer

Despite this, 85% of organizations have determined it’s still too early to discuss the potential impact of coronavirus — 13% said they have had discussions. Of those organizations that said they’ve discussed the possible impacts of coronavirus during their goal-setting process, the most prevalent approaches are:

  • Revisit 2020 goals later this year and make any necessary adjustments (39%); and
  • Exclude the adverse impact of coronavirus when evaluating 2020 performance (19%).


“For compensation committees that already set 2020 incentive plan goals, many committees have agreed to use or will consider using discretion when determining incentive awards,” Lupo said. “For calendar-year companies, it is too early to consider any plan modifications such as changing plan metrics or goals.”

While most organizations (85%) haven’t discussed how COVID-19 might impact incentive payments to executives from 2020 annual or long-term incentive plans, the organizations that have (10%), are choosing to use discretion to determine appropriate payouts if necessary. Additionally, 9% said they are unlikely to make adjustments or use discretion in determining payouts for 2020 performance.

The survey found that many companies (54%) have incentive plans which would permit the compensation committee to make necessary adjustments to exclude the impact of coronavirus. Of the 46% of companies that said that wasn’t the case, 14% said they are considering modifying the adjustment guidelines.

More than one-third (35%) of companies have begun tracking the financial impact of coronavirus. Additionally, 23% said they aren’t tracking this and 20% said they aren’t tracking it because it’s impossible to break out the full impact.

Overall, public companies are facing a variety of challenges at the moment when it comes exec pay. Lupo said these are the most pressing issues at the moment:

  • Potentially modifying incentive plan designs or goals in a way that is supportive of shareholders and other stakeholders and considering proxy advisory firm reactions next year.
  • Discussing whether to reset long-term incentive grants that may never result in award payments.
  • Discussing whether equity grants, that will be made to board directors, should be modified or reduced in value.

About the Author

Brett Christie Bio Image

Brett Christie is the managing editor of Workspan Daily.


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