The Coronavirus disease (COVID-19) outbreak has many companies reeling as they struggle to preserve cash in the face of volatility.
A number of these companies are turning to executive pay cuts to soften the economic blow of the Coronavirus pandemic.
Many companies’ revenues are taking a major hit as the Coronavirus pandemic continues to progress globally and social distancing becomes more widespread. A number of CEOs and other executives are responding to this crisis by taking pay cuts. These pay cuts are undoubtedly common within the airline industry, which has been hurt by trip cancellations and a sharp decline in the demand for travel. However, the airline industry isn’t alone in this regard. We’re seeing more and more cuts to executive pay in other industries, including hospitality, restaurant and manufacturing, to name a few.
Across multiple industries, CEOs and other executives are taking partial and full pay cuts in response to the Coronavirus pandemic. The following information—by no means exhaustive—is intended to show how businesses are responding to the crisis as they struggle to come up with strategies that make way for paths to life on the other side of the virus, using executive pay cuts as a means to preserve cash flows.
On March 18, 2020, Delta Air Lines, Inc. filed an 8-K attaching a memo from CEO Ed Bastian to all employees, wherein he highlighted the importance of “self-help measures … to reduce … losses and preserve cash” during the battle against the coronavirus pandemic and identified his choice to give up his compensation over the next six months as one such self-help measure. In the memo, Mr. Bastian went on to share that members of the Board of Directors have also chosen to forego their compensation over the next six months and that through June 30, 2020, all company officers will take a 50% pay cut, while directors and managing directors will take a 25% cut.
Similarly, United Airlines Holdings, Inc. reported in a March 10, 2020 8-K that it, too, is taking proactive measures to mitigate the financial and operational impact of the Coronavirus on its business and that effective immediately, both CEO Oscar Munoz and President Scott Kirby are going without their entire base salaries through at least June 30, 2020.
Other airlines have followed suit. Alaska Air Group Inc. announced in a March 16, 2020 8-K that CEO Brad Tilden and President Ben Minicucci reduced their base salaries to zero, effective March 7th. Allegiant Travel Company shared in a March 19, 2020 8-K that Chairman and CEO Maurice Gallagher, Jr. and President John Redmond are foregoing their salaries, while other company officers are halving theirs. And Spirit Airlines, Inc., in its March 18, 2020 8-K, filed as an exhibit a letter from CEO Ted Christie to employees, wherein Mr. Christie noted that he will be reducing his salary by 30% and that senior and executive vice presidents and members of the Board of Directors are also reducing theirs.
2) Hospitality and Restaurants
The Coronavirus pandemic also has the hospitality and restaurant industries in distress as people continue to avoid large groups to slow the spread of the virus. Wyndham Hotels & Resorts, Inc.
announced in a March 30, 2020 8-K that as of April 1, 2020, President and CEO Geoffrey Ballotti will forego his entire 2020 base compensation, and each non-employee director serving on the Board will forego the cash-based portion of the 2020 annual retainer and committee chair and membership fees, “indefinitely … until such time as the Compensation Committee determines otherwise in light of the COVID-19 pandemic.”
Similarly, Hilton Worldwide Holdings Inc. issued a press release on March 26, 2020 calling attention to its efforts to significantly reduce expenses and preserve liquidity, which include President and CEO Christopher Nassetta going without his salary for the remainder of 2020 and the Executive Committee taking a pay cut of 50% “for the duration of the crisis.”
The Cheesecake Factory Incorporated also discussed its efforts to combat the business effects of the Coronavirus pandemic in a March 27, 2020 8-K, pointing out decisions by CEO David Overton and other executive officers to reduce their 2020 base salaries by 20% as of April 1, 2020, and decisions by members of the Board of Directors to take a 20% reduction in annual cash retainer fees. Texas Roadhouse, Inc. did the same in a March 25, 2020 8-K, noting that Chairman, CEO and President W. Kent Taylor has chosen to give up his base salary and incentive bonus for the pay period beginning March 18, 2020 and continuing through January 7, 2021.
3) Manufacturing and Automotive
Bogged down by supply-chain disruptions, labor shortages and office closures, the manufacturing and automotive industries are trying to deescalate the economic impact of the Coronavirus pandemic. Briggs & Stratton Corporation, for example, released in a March 27, 2020 8-K that as of April 1, 2020, Chairman, President and CEO Todd Teske’s salary will be cut by 40%, while salaries of the other executive officers will be cut by 35%.
General Electric Company also made known in a March 23, 2020 press release that Chairman and CEO H. Lawrence Culp, Jr. will forego his full salary for the remainder of 2020 and that as of April 1, 2020, David Joyce, Vice Chairman of GE and President and CEO of GE Aviation, will forego half of his salary.
And Ford Motor Company shared in a March 26, 2020 8-K that Executive Chairman William Ford, Jr. will defer his entire salary for at least five months beginning May 1, 2020, while the top 300 senior executives will defer 20-50% of their salaries during that period.
We’ll likely see more cuts to executive pay within these and other industries as companies try to maintain some degree of financial footing, so that they can ride out the economic effects of the Coronavirus pandemic. For more information about what public companies are disclosing about the impact of the Coronavirus on their business, read our special report and check out real-time public company filing examples in SECPlus Advanced on Thomson Reuters Checkpoint.