As the Pandemic Forced Layoffs, C.E.O.s Gave Up Little

When the pandemic prompted companies to furlough or lay off thousands of employees, some chief executives decided to show solidarity by ...


When the pandemic prompted companies to furlough or lay off thousands of employees, some chief executives decided to show solidarity by forgoing some of their pay.

But it turns out that their sacrifice was minimal.

A survey of some 3,000 public companies shows that the cuts — which, so far, have come in the form of salary reductions — were tiny compared with their total pay last year. Total pay includes things like bonuses and stock awards that typically make up the bulk of what corporate bosses take home.

Only a small percentage of the companies cut salaries for their senior executives at all, which is surprising given that the pandemic has crushed profits and sales for many companies, forcing large layoffs. But even among businesses that did cut the boss’s pay, two-thirds of the chief executives took reductions that were equivalent to only 10 percent or less of their 2019 compensation, according to an analysis by CGLytics, a compensation analysis firm.

Companies in this group include the Walt Disney Company, Delta Air Lines, United Airlines and Marriott International. All of those businesses have laid off or furloughed employees or pressed workers to take pay cuts.

This compensation analysis offers another example of how the coronavirus pandemic has walloped the working and middle classes while mostly sparing the people at the very top of the economic hierarchy.

“These salary cuts were more window dressing than anything else,” said Liz Shuler, secretary-treasurer of the A.F.L.-C.I.O. The labor federation on Wednesday released a report showing that companies in the S&P 500 stock index last year paid chief executives on average 264 times as much as median employees, down from 287 times in 2018.

Of course, this analysis is incomplete because the year is not over. In the coming months, corporate boards could decide to significantly reduce the bonuses and stock options they hand out to top executives for 2020. That would represent a big break from recent years when boards, which are primarily made up of corporate executives and investors, approved ever higher pay packages.

A few chief executives have already taken a sizable hit. The survey showed that Glenn Kelman, chief executive of Redfin, a Seattle-based real estate brokerage, took a pay cut that was equivalent to the $284,000 he got in 2019. “The reason we did it is because we had to furlough or lay off more than a thousand people,” Mr. Kelman said when asked what motivated the decision to withhold his salary. “It’s not just about the pay cut; it’s about the general sense that capitalism is not working for everyone.”

CGLytics surveyed the companies in the Russell 3000 index, which comprises most of the publicly traded businesses in the United States, and found that 419 companies had disclosed details of salary cuts. Only about 10 percent of those companies cut salaries by more than 25 percent of the executive’s 2019 total “realized” compensation, a figure that CGLytics came up with by adding up all the money and stock each boss received last year. The firm values the stock at the price at which trading ended on Dec. 31.

The price of many stocks fell sharply this spring when the pandemic took hold. But stocks can recover over time, and many have soared since March.

As it became clear that the pandemic was going to devastate the economy and their businesses, many boards and chief executives appeared to sense a need to tell workers and investors that they were sharing in the pain.

United Airlines said the executives’ salary cuts were a recognition of the impact of the pandemic and “to lead by example.” United, which has been hit hard by a plunge in demand for air travel, is expected to start furloughing up to 36,000 workers on Oct. 1. Oscar Munoz, who in May became United’s executive chairman after serving as chief executive, did not get salary from March 10 through June 30, which amounted to a $610,000 pay cut on the $2 million salary he is being paid this year. But the reduction was a little less than 3 percent of the $22.2 million Mr. Munoz took home in 2019.

United’s new chief executive, J. Scott Kirby, will give up around $790,000 of salary this year. That is equivalent to 9 percent of the $8.7 million that CGLytics estimates he received last year. United said that it was “extremely unlikely” that it would make 2020 bonus payments, which it planned to set at 250 percent of salary, to its top executives.

Delta’s chief executive, Ed Bastian, took a salary cut of around $714,000, or 5.35 percent of the total compensation he received in 2019, according to CGLytics. A Delta representative said the decline in Delta’s stock price and difficulties ahead for the airline would weigh heavily on the value of Mr. Bastian’s pay. The spokesman, Trebor Banstetter, said the value of Mr. Bastian’s total compensation this year was likely to be down 58 percent from “pre-pandemic projections,” but he did not provide details of how the company arrived at that figure. Delta is asking its pilots to take pay cuts in order to keep their jobs.

Disney awarded Robert A. Iger, its former chief executive who stepped down in February, large compensation packages over the nearly 15 years that he led the company. Mr. Iger, who is now executive chairman, gave up his salary from the end of March through the end of the year. The $2.25 million in forgone pay is equivalent to 3.3 percent of Mr. Iger’s total realized compensation in 2019, according to CGLytics. Disney furloughed tens of thousands of workers in March.

The hotel industry has also been hit hard by the pandemic and companies like Marriott International have been furloughing and laying off workers. The company’s chief executive, Arne M. Sorenson, took a salary cut that was equivalent to less than 2 percent of the $66 million in total compensation that CGLytics says he was paid in 2019. Connie Kim, a Marriott spokeswoman, said nearly $50 million of the compensation for last year was related to stock appreciation rights granted nine to 10 years earlier.

Some companies merely deferred salary payments for senior executives, rather than make outright cuts. General Motors deferred 30 percent of the salary of its chief executive, Mary T. Barra, and other top leaders, and 20 percent of other white-collar employees. The deferrals, which began on April 1, were going to last for as long as six months, but on Tuesday, General Motors told employees that it was ending the 20 percent deferrals on Aug. 1. Ms. Barra and the other senior executives will continue to defer 10 percent of their salaries. She made $30 million in total realized compensation last year, according to CGLytics.

When asked why the deferrals were ending sooner than expected, James R. Cain, a company spokesman, said, “The business demanded that we conserve cash and it is recovering faster than we expected.”

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Newsrust: As the Pandemic Forced Layoffs, C.E.O.s Gave Up Little
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