Sarah Anderson, global economy project director at the Institute for Policy Studies, a progressive think tank, says that approach reminds her of bank executives who got options at the depth of the Great Recession and reaped a windfall.
“Once again, just as in the aftermath of the 2008 crash, corporate boards are fixating on protecting the paychecks of those executives who sit at the corporate summit,” Anderson told lawmakers at a Congressional hearing in March.
Larry Culp, General Electric Co.’s CEO, caught a break from his board that may not pay off until later. Culp had been on track for a windfall. If the stock hit $31, he’d get an equity award worth $230 million.
In the pandemic, GE’s shares slipped to their lowest level in three decades. So, last year, the board granted him a new award with a lower bar, $16.68, so he’ll have a shot at the jackpot. The board said it was part of a contract extension needed to secure Culp’s continued leadership at an uncertain time.
Some shareholders object to moving the goal posts. In January, more than half of Walgreens Boots Alliance Inc.’s investors voted against the executive pay program.
The pharmacy chain excluded part of 2020 results from a bonus calculation. That shift let three top bosses collect equity awards worth $7.68 million that otherwise would have been forfeited.
Vanguard Group Inc., its second-largest shareholder, said in a statement that it opposed the plan because the board’s changes “did not appropriately reflect Walgreens’ performance versus peers.” The votes are non-binding, so the executives got their money, anyway.
Walgreens said the change rewarded their “extraordinary efforts” and unanticipated impact of the pandemic.
Nowhere is the divide between pay and corporate performance—as well as the boss and workers—starker than at Norwegian. The cruise line grounded its 28 ships, which employed 31,000 crew members who generally get paid only if vessels sail.
The company cut the salaries of remaining employees, including CEO Del Rio and other top brass, by 20%.
Then the board stepped in. In July, it awarded Del Rio’s lieutenants $2 million each of extra stock awards. And in October the directors changed performance criteria for some of their other outstanding awards—partly for the pandemic, partly for a government-mandated end of cruises to Cuba. As a result, Del Rio’s pay rose by $4.4 million.
That month, the CEO, whose contract expired at the end of the year, received another $8.8 million in cash and stock as retention awards, so he’d stay through 2023. And the board opted to pay executive bonuses even though the original target for adjusted earnings was way out of reach because the companies sales had plunged 80%.
In a filing, the board’s compensation committee said it needed to “ensure stability in the organization and to ultimately drive our company’s recovery.”
The package is up for an investor vote on May 20. The results are non-binding, so Del Rio will keep his money regardless of the outcome.
Meanwhile, many Norwegian crew members have abandoned the profession, while others are waiting and hoping that their jobs will return, said Lena Dyring, director of cruise operations for the Norwegian Seafarers’ Union. “For seafarers in the cruise industry, it has been devastating.”
—With assistance from Jenn Zhao.
This article was provided by Bloomberg News.