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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 Forbes.com, 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.
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.
*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.
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 email@example.com.