Every year, there’s a lot of misinformation when it comes to executive compensation. The headlines typically focus on public companies—and, more specifically, on Fortune 500 CEOs. Lumping all chief executives and senior executives in together based on this small subset, as if they’re some homogeneous pack, is, of course, intellectually lazy. But more pragmatically, the lack of information for private companies across all revenue ranges—which form the largest part of American enterprise—means many organizations make uninformed and reactive compensation decisions.
Further muddling the compensation landscape, the pandemic has forced companies to adjust their executives’ base pay to navigate the crisis. As businesses begin to adapt to a Covid world, there’s never been a more challenging time to ensure they offer competitive compensation programs to attract, retain and align the top talent that will ensure the health of their businesses. To succeed in a post-Covid environment, companies will need to be proactive with their pay strategy, rather than reacting—often too late—after top talent walks out the door.
Enter Chief Executive. In our just-released 2020-21 CEO & Senior Executive Compensation Report for Private Companies, we dug into the immediate impacts of Covid on leadership pay and found that 37 percent of private companies in the U.S. reduced their CEO’s base salary in 2020 in response to the crisis—the majority of which report cuts of 10 percent to 30 percent.
Perhaps unsurprisingly, nearly 70 percent of companies in the restaurant industry slashed CEO pay. But media CEOs were hit even more often—and advertising/marketing and entertainment industry chiefs were cut as well. Financial services, biotech, pharma and construction leaders were the least impacted, our survey found.
The research also shows that of those companies cutting their CEOs’ base salary in 2020, the majority were doing so for at least three months—and a whopping 45 percent say the reductions will either remain in place until the end of the year or until such time when the company is profitable again.
As a result of the crisis response, median CEO cash compensation for 2020 is expected to decrease by 15 percent: a 5 percent cut to base salary and 60 percent to bonus awards.
ABOUT THE REPORT: With data collected from 1,780 companies, the 2020-21 CEO & Senior Executive Compensation Report for Private Companies, available now, showcases more than 140,000 data points—including values by industry, ownership type and company size. Order the report >