Lead5 Analysis of Public Company Executive Salary Reductions
As we have now entered week four of the economic lock-down caused by the global Covid-19 pandemic, the economy is approaching record levels in unemployment as U.S. companies scramble to navigate the crisis. Lead5, the Executive Career Platform, has analyzed public company filings to produce a detailed view of how executive management teams are handling executive compensation in response to the economic crisis.
The first red flag and the turbulent weeks that followed
On March 16, Lead5 observed that Ashford Inc. announced salary reductions for its leadership team. Ashford Inc. is a small cap company based in Dallas, Texas that provides asset management services to the hospitality industry, so it is no surprise that they took swift action ahead of the brutal hit to their industry sector. Three days later, two more public companies made salary reduction announcements, Darden Restaurants and Hersha Hospitality. Darden is the large cap holding company for familiar consumer brands such as Olive Garden & Longhorn Steakhouse, and Hersha is a small cap hospitality REIT.
What followed over the next three weeks is a cascade of salary reduction announcements from over 150 public companies across all industry sectors with more being added on a daily basis. Below are summaries of the average reductions of executive salary by management teams and market cap, along with data broken out by industry sector and region.
Average Executive Salary Reduction by Company Size for Senior Management Teams
- All Companies, All Market Caps = 30%
- Large Cap Only = 39%
- Mid Cap Only = 29%
- Small Cap Only = 26%
Average CEO Salary Reduction by Company Size
- All Companies, All Market Caps = 50%
- Large Cap Only = 71%
- Mid Cap Only = 45%
- Small Cap Only = 41%
Average Executive Salary Reduction by Industry Sectors
- Consumer 48%
- Industrial 24%
- Healthcare 12%
- Technology 10%
- Financial 6%
Average Executive Salary Reduction by Headquarters Regions
- Southeast 23%
- Midwest 20%
- West 18%
- Southwest 17%
- Mid-Atlantic 16%
- New England 6%
How long will these reductions continue?
The most common reported durations for these salary reductions are until June 30th, 2020 followed by September 30th, 2020. A number of companies stated the executive team salary reductions will remain in place until the board determines the Covid-19 crisis is over. Several companies included a reduction or elimination of board retainer fees for the duration of the crisis. Notably, of roughly half of the large cap announcements, CEOs have forgone 100% of their respective salaries. These overall findings represent just a fraction of the total public companies in the U.S., so we anticipate continued ongoing announcements.
This Lead5 analysis is based on 153 public company filings between March 16 and April 9, 2020. Lead5 will continue to analyze and report as new filings occur.
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