COVID-19 | CEO pay remains stratospheric, even at companies battered by pandemic

FILE -- Sen. Elizabeth Warren (D-Mass.) during a hearing of the Senate Health, Education, Labor, and Pensions committee in Washington on Feb. 3, 2021. Sen. Warren has proposed new taxes on the ultrawealthy. (Anna Moneymaker/The New York Times)

David Gelles

Boeing had a historically bad 2020. Its 737 Max was grounded for most of the year after two deadly crashes, the pandemic decimated its business, and the company announced plans to lay off 30,000 workers and reported a $12 billion loss. Nonetheless, its CEO, David Calhoun, was rewarded with some $21.1 million in compensation.

Norwegian Cruise Line barely survived the year. With the cruise industry at a standstill, the company lost $4 billion and furloughed 20% of its staff. That didn’t stop Norwegian from more than doubling the pay of Frank Del Rio, its CEO, to $36.4 million.

And at Hilton, where nearly a quarter of the corporate staff members were laid off as hotels around the world sat empty and the company lost $720 million, it was a good year for the man in charge. Hilton reported in a securities filing that Chris Nassetta, its CEO, received compensation worth $55.9 million in 2020.

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The divergent fortunes of CEOs and everyday workers illustrate the sharp divides in a nation on the precipice of an economic boom but still racked by steep income inequality. The stock markets are up and the wealthy are spending freely, but millions are still facing significant hardship. Executives are minting fortunes while laid-off workers line up at food banks.

“Many of these CEOs have improved profitability by laying off workers,” said Sen. Elizabeth Warren, D-Mass., who has proposed new taxes on the ultrawealthy. “A tiny handful of people who have shimmied all the way to the top of the greasy pole get all of the rewards, while everyone else gets left behind.”

For executives who own large stakes in giant companies, the gains have been even more pronounced. Eight of the 10 wealthiest people in the world are men who founded or ran tech companies in the United States, and each has grown billions of dollars richer this year, according to Bloomberg. Jeff Bezos, the founder of Amazon, which saw profits skyrocket with people stuck at home, is now worth $193 billion. Larry Page, a Google co-founder, is worth $103 billion, up $21 billion in the last four months alone, as his company’s fortunes have improved during the pandemic.

And, according to security filings, a select few are rapidly accumulating new fortunes. Chad Richison, founder and CEO of an Oklahoma software company, Paycom, is worth more than $3 billion and was awarded $211 million last year, when his company made $144 million in profit. John Legere, the former CEO of T-Mobile, was awarded $137.2 million last year, a reward for taking over the rival Sprint.

“We’ve created this class of centimillionaires and billionaires who have not been good for this country,” said Nell Minow, vice chair of ValueEdge Advisors, an investment consulting firm. “They may build a wing on a museum. But it’s not infrastructure — it’s not the middle class.”

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The gap between executive compensation and average worker pay has been growing for decades. CEOs of big companies now make, on average, 320 times as much as their typical worker, according to the Economic Policy Institute. In 1989, that ratio was 61-1. From 1978 to 2019, compensation grew 14% for typical workers. It rose 1,167% for CEOs.

The pandemic only compounded these disparities, as hundreds of companies awarded their leaders pay packages worth significantly more than most Americans will make in their entire lives.

“To my mind, they’re the logical consequence of our total embrace of shareholder capitalism, starting with the corporate raiders of the 1980s, to the exclusion and sacrifice of all else, including American workers,” said Robert Reich, a labor secretary under President Bill Clinton. “The pay packages reflect soaring share prices, which in turn reflect, at least in part, the willingness if not eagerness of corporations to cut payrolls at the slightest provocation.”

AT&T, the media conglomerate, lost $5.4 billion and cut thousands of jobs throughout the year. John Stankey, the CEO, received $21 million for his work in 2020, down from $22.5 million in 2019.

T-Mobile said it would create new jobs through its merger with Sprint, but has already begun layoffs. It made $3.1 billion in 2020. In addition to Legere’s windfall, the company awarded its current CEO, Mike Sievert, $54.9 million.

Tenet Healthcare, a hospital chain, furloughed about 11,000 workers during the pandemic, but made nearly $399 million in profit. “The last 12 months clearly have been an extraordinary challenge and learning experience,” the company’s CEO, Ronald Rittenmeyer, wrote in a filing with the Securities and Exchange Commission. In the same document, Tenet revealed that Rittenmeyer earned $16.7 million last year.

And L Brands, owner of Victoria’s Secret, cut 15% of its office staff and temporarily closed most of its stores during the pandemic. Andrew Meslow, who took over from Leslie H. Wexner as CEO in February last year, still earned $18.5 million.

“They always talk about how their employees are the most important assets,” Minow said. “But they sure don’t treat them that way.”

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Dozens of public companies have already reported paying their CEOs $25 million or more last year, according to Equilar, an executive compensation consulting firm. Several companies that announced major layoffs last year, including Comcast and Nike, have not yet released executive compensation data for last year.

Many companies defended their executive compensation plans. In some cases, CEOs took less than they were entitled to. Most top executives receive the bulk of their pay in shares, which may decrease in value and often vest over several years. And at many companies, the stock price was up despite the turbulence in the economy and regardless of whether the company was profitable.

EXECUTIVES PAY: While millions of people struggled to make ends meet, many of the companies hit hardest in 2020 showered their executives with riches (Source: NYT)

“At the end of the day, CEOs end up getting rewarded for how they respond to these external occurrences,” said Jannice Koors, a compensation consultant at Pearl Meyer who works with companies to determine executive pay. “If you think about stores closing, furloughs, etc., CEOs are getting rewarded for making those decisions.”

In many ways, the role of corporate chieftains has never been more pronounced. Beyond running their businesses, CEOs have emerged as prominent voices in the national conversations around race, climate change and voting rights.

At the same time, they face critics on all sides. Sen. Mitch McConnell, R-Ky., recently told companies protesting Republican efforts to overhaul voting laws to “stay out of politics.” Meanwhile, labor advocates are calling on companies to take better care of their workers.

“It’s time for the corporations in this nation to play their part in a recovery that can be shared by everybody,” said Mary Kay Henry, international president of the Service Employees International Union. “We cannot reinforce the economic inequality that existed before the pandemic.”

Executives at publicly traded companies receive most of their compensation in stock, an arrangement intended to align pay with the performance of a company’s share price. When the stock price goes up, the theory goes, investors and executives alike share in the gains.

Defying logic, the stock market has been soaring for months now, more than making up the losses it suffered early in the pandemic. As a result, many CEOs ended the first year of the pandemic having overseen, improbably, a rise in their company’s share price. The resilience of the markets, and the sense that COVID-19 was an act of God, not the fault of any one person, helped companies justify big pay packages.

“Boards were thinking: ‘This isn’t our management team’s fault. This isn’t the result of bad planing or lax governance. This kind of happened to everybody,’” Koors said. “There was a sense in boardrooms that if, despite all this, they managed to deliver on the numbers, who are we to cut those payments in a year when everyone worked their butts off?”

Some investors and corporate governance groups are pushing back on executive compensation plans.

Starbucks shareholders voted last month against the compensation plans for the company’s two top executives. The resolution was nonbinding, however, and the CEO, Kevin Johnson, received $14.7 million in cash and stock last year.

The biggest clash over pay this year is at General Electric, a company still reeling from years of mismanagement. Larry Culp, the CEO, received $73.2 million last year and could collect well over $100 million more, thanks to a recently updated pay plan. Several prominent corporate governance groups have come out in opposition to Culp’s pay, and investors will vote on the issue at GE’s annual meeting next month.

Even when executive pay was slashed, it often remained high. Robert A. Iger, the chairman of Walt Disney Co., last year earned less than half what he did in 2019, but his compensation was still $21 million. The pay cut was a reflection of his move from CEO to executive chairman, and of the difficult year at Disney, which laid off more than 28,000 people as its theme parks shut down.

At Boeing, Calhoun voluntarily gave up most of his cash salary this year, taking just $269,231 of the $1.4 million he was entitled to. Still, thanks to stock awards, his compensation was more than $21 million.

“Dave obviously gave up a lot,” a Boeing spokesperson said in an email.

A Hilton spokesperson said the $55.9 million figure reported in the company’s annual filing did not reflect Nassetta’s actual pay. Because of the pandemic, Hilton restructured several complex stock awards. As a result, Nassetta’s actual earnings for 2020 will be closer to $20.1 million, a slight decrease from 2019.

“2020 was an anomaly in so many ways,” the spokesperson said in an email.

c.2021 The New York Times Company

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