Norwegian Cruise Line called 2020 its “most challenging year.” The company lost $4 billion, a half decade’s worth of profit. Shares dropped 56%. Thousands of crew members lost their livelihoods.
But Frank Del Rio, its chief executive officer, did just great. He collected his biggest-ever pay package: $36.4 million.
How? Corporate boards cut Del Rio and scores of other CEOs extraordinary slack for miserable results in the pandemic, securities filings show. Otherwise, their pay would have plunged because it is tied to metrics such as sales, profit and stock prices.
Compensation committees decided the crisis wasn’t the bosses’ fault, so they shouldn’t suffer the consequences. Boards handed out “special awards” for persistence. They eased up on performance goals, so executives could still collect bonuses. They granted retention awards, so they wouldn’t get discouraged and quit.
More than 300 companies have tweaked pay to give top executives a break in 2020 or said they’ll apply discretion on payouts, according to data compiled by the Conference Board, data analytics firm Esgauge and Semler Brossy, a compensation advisory firm.
As a result, the leaders as a group collected bonuses worth hundreds of millions that would otherwise have been wiped out. Norwegian Cruise Line Holdings Ltd. didn’t respond to requests for comment.
Shareholders—not to mention employees—got no such bailout. And in good times, boards hardly ever curb compensation because of a strong economy or a lucky break, rather than executive performance.
“These are the last people that need to have their pay accommodated,” said Rosanna Landis Weaver, a program manager at As You Sow, a non-profit focused on shareholder advocacy. “If it’s heads I win, tails I win almost as much—that’s not pay-for-performance. It’s just ridiculous.”
But Robin Ferracone, CEO of Farient Advisors, a consulting firm that works with companies to set executive pay, says it can be reasonable and fair to ease up during a big crisis because talented executives are often sought after and can jump ship if they consider themselves unduly penalized.
Many corporations, particularly in the technology sector or others benefiting from stay-at-home customers, had banner years during the pandemic. The typical company in the Russell 1000, an index of larger corporations, reported CEO compensation up 3% last year, according to data compiled by Bloomberg that is derived from filings available as of April 30.
“For the most part, companies were reasonable and measured in their response in 2020,” Ferracone said.
These behind-the-scenes pay boosts contrast sharply with what Corporate America said during the early days of the pandemic, when firms announced CEO salary cuts in solidarity with front-line workers. A study by governance data provider CGLytics shows that executive salary reductions at 116 companies in the S&P 500 averaged 6% of their 2019 pay packages.
Some companies made real cuts. Rockwell Automation Inc., which sells industrial equipment, paid no annual bonuses to senior executives last year, saving the company a few million dollars.
Others, including manufacturer Patrick Industries Inc. and car retailer Sonic Automotive Inc., last year canceled some awards and instead gave executives stock options for retention purposes. These have swelled in value as shares of both companies have surged past their pre-pandemic records.