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About two years ago, I wrote a post about director compensation, quoting the old saw that pigs get fat but hogs get slaughtered. Given what I’ve been reading of late, I think it’s time for a refresher, but this time I’m discussing executive, rather than director, compensation.

With the onset of the COVID-19 pandemic, a number of companies or their executives took action to reduce pay.  In some cases, salaries were reduced to $1 a year or eliminated entirely.  So far, so good.  However, there were also cases in which the executives were given so-called mega-grants of equity to make up for their sacrifices.  That may have raised a few eyebrows, but the eyebrow-raising may have been mitigated or overlooked because the grants were made when the stock markets had dropped precipitously and many companies’ shares were trading at 52-week lows.

Of course, what goes down must come up, so when the stock markets rallied (and, in general, have continued to rise to levels that seem absurd in the face of what’s going on these days), the noble executives who sacrificed pay made out like bandits. Or hogs.  No sane person would argue that the stock markets have any rational connection to corporate performance generally, much less to that of a particular company.  However, the rising tide has floated a number of boats, including the holders of those mega-grants.

A number of reports in the media and elsewhere have highlighted the unseemliness of these apparent windfalls at a time when those companies’ employees have been “furloughed” or worse.  On June 3, 2020 the always interesting newsletter, Compensation in Context, put out by Veritas Compensation Advisors noted that a review of regulatory filings had identified “six U.S. companies…that have moved to shield their executives’ compensation from the pandemic’s economic fallout as they laid off or furloughed workers.”  And in the June 10 issue of the New York Times “DealBook” newsletter, an article entitled “The Great Options Giveaway” noted as follows:

“A new analysis by The Financial Times found that many companies have given executives much larger stock and options packages during the pandemic — more than making up for cuts in top managers’ salaries. About 50 companies gave their C.E.O.s 50 percent more options than last year, the FT found. Many of the awards were made when markets plunged in March; that is consistent with the timing of pay decisions in previous years, although some grants seemed arranged to price very close to the market bottom The boost may be the result of companies offering packages with a similar dollar value at a point when the shares were much cheaper than before.”

The concept of “shielding” executive pay at a time when so many people are suffering seems to me to define the word “unconscionable.”  However, what goes around comes around, so I won’t be surprised if companies providing those shields find themselves stuck with the “swords” of failing say-on-pay votes during the 2021 annual meeting cycle.  Those votes are advisory only, but they can still pack a wallop.