The impact of COVID-19 on executive pay

July 01, 2020

Organizations around the world are dealing with economic uncertainty and financial strain as a result of the COVID-19 pandemic. One very visible action that companies are taking is to reduce pay, starting at the top.

According to a recent article on, CEOs of many prominent companies such as Marriott, Southwest Airlines, and Columbia Sportswear are among the many who have either completely given up their salaries or taken significant pay cuts, most of them temporary and for a predetermined time period. Additional examples are Canadian companies such as Enbridge and Telus, whose leaders have either reduced or forgone their salaries for a period of time. Many of these leaders also committed to not laying off employees. If you were around during the last significant economic crisis in 2008-2009, you may agree that this is a much different story from what we experienced then. This time, organizations do seem to be putting an emphasis on leading with empathy and caring for their employees.

Country CEO Pay Reduction
Organization Count
Median Reduction Other Executive Pay Reduction
Organization count
Median Reduction
United States 558 30% 509 20%
Canada 78 20% 70 20%

Source: Publicly available data such as filings and press releases.

Of course, to what extent industries have been impacted varies greatly, even just within North America.

In Canada, the Energy and Industrial sectors are the hardest hit and lead the list of pay cuts for executives. While in the US, the Consumer Discretionary sector, which includes hard-hit Specialty Retail and Hotel, Restaurant, and Leisure, has announced the most base pay reductions for executives.

However, the actual magnitude of the pay cuts also varies, with median pay cuts ranging from 20% to 50% in both the US and Canada.

Median Base Salary Reduction by Sector – Canada

  CEO Other Executives
Consumer Discretionary 50% 20%
Industrials 40% 29%
Materials 20% 20%
Energy 20% 11%
Communication Services 0% 20%
Consumer Staples    
Health Care 20% 20%
Information Technology    
Real Estate    

*Medians only shown for Sectors with 5 or more observations

Median Base Salary Reduction by Sector – United States

  CEO Other Executives
Communication Services 30% 20%
Consumer Discretionary 50% 25%
Energy 20% 20%
Financials 38%  
Health Care 30% 25%
Industrials 30% 20%
Information Technology 25% 20%
Materials 25% 20%
Real Estate 50% 24%

*Medians only shown for Sectors with 5 or more observations

And the actions impacting executives do not stop at reducing base pay. Some companies have also reported reducing or deferring the annual bonus or even eliminating a 401K match. It’s safe to say that many organizations are looking for ways to cut costs while minimizing the impact on the broad employee population.

If reducing executive base pay is something your organization is considering, refer to the questions within this helpful framework to determine whether adjusting executive pay is the right move for your organization.

1 Establish core principles and a decision framework that can be used to guide the discussions for the balance of the year.
2 Monitor what peers and the broader market are doing, but recognize that “following the herd” may not be right for YOU.
3 Can the decision wait for the market to stabilize before making major changes to incentive plans or in-flight awards?
4 Assess whether the 2020 performance metrics are still driving the right behavior or if they need to be complimented/replaced with other metrics.
5 Assess your long-term incentive vehicle mix and consider the pros and cons of cash-based vs. dilutive (and volatile) share-based awards.
6 Model potential scenarios to estimate possible windfalls of any 2020 share-based awards not yet granted.
7 Consider the use of pragmatic discretion, but ensure it’s applied with adherence to the core principles and decision framework.
8 Ensure your decisions do not contradict the message being delivered to the broader workforce and shareholders.
9 Be mindful of what proxy advisors are saying.
10 Think ahead to your 2021 proxy disclosure and ensure you can clearly explain the rationale behind any decisions made now.

Additionally, make sure you understand how your executives’ total compensation is positioned against their peers. Executive remuneration data, including base pay information, such as Mercer’s Executive Remuneration Suite is a helpful tool for decision makers to use in conjunction with proxy data, when making pay decisions affecting the organization’s leadership team.

Need more information on executive pay practices? We’re just a phone call away — 855-286-5302, or email us at