It looks as though we are in the midst of another recession where those in the C-suite are little affected; and in some cases where the Fed has stepped in, doing better than they were financially before the pandemic. And the “shared sacrifice” from most company’s CEOs – many of whom took pay cuts to show “solidarity” with employees – has actually been far less than imagined.
A new survey from the NY Times shows that out of 3,000 public companies, these cuts have come in the form of salary reductions that paled in comparison to CEO’s total pay, which is often made up of stock awards and bonuses.
It was “only a small percentage” of companies that even cut salaries for their senior executives to begin with, the Times notes. Among the ones who cut, about 66% of CEOs took reductions that were equivalent to only 10% or less of their total 2019 compensation. Companies in this group include Walt Disney Company, Delta Air Lines, United Airlines and Marriott International.
Companies last year paid executives an average of 264 times their median worker salary. It’s another example of how the pandemic has disproportionately affected the middle and lower class. The Fed’s response to the crisis, has also served as a monumental example of this.
Liz Shuler, secretary-treasurer of the A.F.L.-C.I.O. said: “These salary cuts were more window dressing than anything else.” Next on the chopping block this year would be bonuses and stock option awards, but it is unclear whether or not Board of Directors will implement such measures.
And not all CEOs have escaped major pay cuts. Glenn Kelman, CEO of Redfin, took a pay cut equivalent to $284,000, the Times reports. He said: “The reason we did it is because we had to furlough or lay off more than a thousand people. It’s not just about the pay cut; it’s about the general sense that capitalism is not working for everyone.”
Out of the 3,000 companies surveyed in the Russell index, 419 of them had disclosed details about salary cuts and only about 10% of those companies cut salaries by more than 25% of the executive’s total realized compensation.
United Airlines said its executives salaries were to “lead by example”, since the company will likely have to furlough 36,000 workers on October 1. The company’s executive chairman, Oscar Munoz, did not draw a salary between March 10 and June 30, amounting to a $610,000 pay cut – but it amounts for less than 3% of the $22.2 in total compensation he took home in 2019.
United’s new chief executive will forego about $790,000 in salary this year, which amounts to about 9% of the total compensation he received last year. United says it is “extremely unlikely” there will be bonuses paid in 2020.
Delta chief executive Ed Bastian took a salary cut of about $714,000, which amounts to about 5.35% of the compensation he received in 2019. The company is also asking its pilots to take pay cuts in order to keep their jobs.
Disney’s Robert Iger gave up his salary from the end of March until the end of 2020. The $2.25 million he is surrendering amounts to about 3.3% of what he earned in 2019.
Mariott, which has also been laying off and furloughing workers, saw its CEO take a salary cut that was less than 2% of the $66 million in total compensation he received in 2019.
Other companies simply deferred their salary payments instead of making cuts. GM, for example, deferred 30% of CEO Mary Barra’s salary. The deferrals will end on August 1 and executives will continue to defer 10% of their salaries going forward. The deferrals started in April and were supposed to last 6 months.
When the company was asked about why they ended early, they stated: “The business demanded that we conserve cash and it is recovering faster than we expected.”
Great, so we should expect nothing but blowout results from General Motors for the rest of the year.