The COVID-19 global pandemic has had a profound impact on the economy and forced many companies to make dramatic changes in staffing, operations, supply chains, and short- and long-term business plans. At the time this article is being written, close to 10 million fewer people are employed in the U.S. than at this time last year. Many companies acted swiftly at the onset of COVID-19 in the U.S. by implementing base salary reductions, enacting furloughs, suspending 401(k) matches, and taking other measures to reduce cost, improve cash flow, and strengthen balance sheets. By the end of April 2020, as lockdowns eased, the major stock indices started to recover, and companies showed their resiliency by adapting their operations to fit the new COVID-19-dominated environment.
As companies reset business plans and priorities in response to the pandemic, compensation committees and senior management teams also began to assess the pandemic’s impact on their incentive plans—both what had happened and what may yet happen—and discuss what actions, if any, might be appropriate to address these disruptions in compensation programs that were established prior to the onset of the pandemic.
Pay Governance reviewed the proxy filings of S&P 1500 companies (available as of February 8, 2021) with fiscal years (FYs) ending between April 30, 2020 and October 31, 2020 (“early filers”). We focused on disclosure related to 2020 annual incentives (AIs), long-term incentives (LTIs) with performance periods ending in 2020, and “in-flight” incentive awards (i.e., incentive awards with a performance measurement period that has not yet concluded). We also reviewed forward-looking disclosures about 2021 compensation structures to identify the key changes (or lack thereof) and researched how shareholders and the proxy advisory firms reacted to the changes.
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