Lead5 Analysis of Executive Salary Reductions for Public Companies
ALPHARETTA, Ga., May 14, 2020 /PRNewswire/ -- The global COVID-19 pandemic has caused record levels of executive salary reductions 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 sharp economic decline.
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. Ashford Inc. has recently come under scrutiny after receiving at least $70 million in loans from the government's small company Paycheck Protection Program which Ashford Inc. now says it will return.
Three days after Ashford cut executive salaries, two more public companies followed suit, 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 six weeks is a cascade of salary reduction announcements from over 275 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 = 35%
- Mid Cap Only = 30%
- Small Cap Only = 27%
Average CEO Salary Reduction by Company Size
- All Companies, All Market Caps = 46%
- Large Cap Only = 58%
- Mid Cap Only = 44%
- Small Cap Only = 40%
Industry Sector Breakout % of Total Companies Reviewed
- Consumer 40%
- Industrial 28%
- Healthcare 14%
- Technology 11%
- Financial 7%
Headquarters Regions Breakout % of Total Companies Reviewed
- Southeast 20%
- Midwest 21%
- West 20%
- Southwest 14%
- Mid-Atlantic 18%
- New England 7%
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 that the executive team salary reductions will remain in place until their boards determine that the COVID-19 crisis is over. Several companies announced 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 a sample of the total public companies in the U.S. and Lead5 will track the announcements that will follow.
This Lead5 analysis is based on 284 public company filings between March 16 and May 7, 2020. Lead5 will continue to analyze and report as new filings occur.
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