Take a look at how companies are re-evaluating compensation and governance approaches in light of new changes and pressures.
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Compensation & Governance Strategies in the Era of Covid-19
Dear Friend,
As we come to the conclusion of the second month of the Covid-19 shutdown, companies are still trying to come to terms with new realities and strategies for adapting, both to the current crisis and for a transformed post-Covid world.
In this month’s Comp & Gov Spotlight, we take a look at how companies are re-evaluating compensation and governance approaches in light of new changes and pressures. These range from temporary pay cuts to show solidarity with furloughed workers to deeper questions over compensation strategy and incentives.
As I recently noted in an Agenda article (included below), many key executives are also postponing their retirement plans in anticipation of having to address various coronavirus-related challenges, while companies “are lengthening the terms of transition agreements and extending the amount of time departing executives were to stay aboard.” I discuss how this trend is likely temporary and specific to the current situation.
We hope you are staying safe and healthy.
Sincerely, Robin Ferracone
Hot Off The Press From Farient
Why Voluntary CEO Pay Cuts, While Largely Symbolic, Matter in ESG Context
Voluntary CEO pay cuts were an early response to the Covid-19 crisis. In this interview with S&P Global, I point out that while pay cuts will likely not save enough money to prevent layoffs, they do signal that companies will adopt a broader “stakeholder” approach to ESG as economic problems persist.
In this article, I discuss that executives putting off leaving their roles is likely a temporary trend, noting that “Once people can travel and do their work more normally this will reverse itself, but for right now, changes in who is playing what role are being minimized…[Companies are] delaying people’s start dates…[and] keeping executives who are already familiar with the role in place.”
Companies That Don’t Cut Executive Pay Now Could Pay for It Later
Though it can be argued that CEO pay cuts due to Covid-19 are largely symbolic, that symbolism matters within the context of ESG and the evolving “stakeholder” corporate model. This Wall Street Journal article discusses why companies that do not cut CEO pay now may suffer long-term reputational harm.
Challenges around CEO succession can be difficult to address in regular times, but according to this Harvard Business Review article, they are especially fraught during a crisis like Covid-19. This article poses four questions that boards should ask if they are currently preparing for the possibility of a new chief executive.
Robin is our Founder and Chief Executive Officer. She is the author of the book entitled, “Fair Pay Fair Play: Aligning Executive Performance and Pay” and is a frequent presenter for well-known organizations including Council of Institutional Investors, Society for Corporate Secretaries and Governance Professionals, the National Association of Corporate Directors (NACD), and The Conference Board, among others. Robin has written extensively on the topics of performance management, incentive plan design, goal setting, and corporate governance. She has been quoted by several business and industry publications including, The New York Times, The Wall Street Journal, and The Washington Post. Learn more about Robin.
Farient Advisors LLC is an independent executive compensation, performance, and corporate governance consultancy. Farient provides a comprehensive array of services to boards of directors and management including: compensation program design, goal setting and performance measurement, pay and performance alignment, board of directors compensation, and shareholder communication among others. Farient has offices in Los Angeles and New York and covers clients in more than 30 countries through our partnership in the Global Governance Executive Compensation Group (GECN).
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