And as the post-crisis years showed, the market tends to reward capital over labor. In the past decade, public-company executives have reaped billions of dollars in gains from stock-based awards, some of which were granted at the depths of the Great Recession, while millions of people have struggled for years to regain their footing.
“There’s just the general view that we need to pay attention to all stakeholders,” said Robin Ferracone, CEO of Farient Advisors, which gives boards advice on executive pay. “It can’t just be that some are getting richer and the rest are taking it on the chin.”
It’s part of a longer-term trend. Chief executives at the largest U.S. companies saw their pay skyrocket 940% between 1978 and 2018, a study showed last year, largely helped by stock gains. Worker wages, meanwhile, increased by just 12%.
In some instances, hefty stock awards have arguably made sharing the pain an exercise in virtue signaling. In April, Greg Case, CEO of global insurance and consulting firm Aon Plc, said he would give up 50% of his $1.5 million salary for the rest of the year as part of broader pay cuts. Roughly 70% of Aon’s workforce will see their salaries reduced by a fifth.
However, Aon still will pay about $100 million in dividends to shareholders on May 15. Like many other CEOs, Case has amassed a sizable ownership stake since he started in 2005, roughly 1.2 million shares. His cut of the quarterly payout — about $531,000 — will more than make up his lost salary.
Other employees who hold shares will benefit, too. But unlike Case, few also have tens of millions of dollars in unvested stock awards outstanding.
Aon declined to comment beyond Case’s open letter to employees. In it, Case wrote “paying a regular dividend is consistent with maintaining an investment grade rating and fundamental to accessing the capital markets.”
The pandemic has also brought into stark relief the lucrative golden parachutes given to corporate executives. In March, MGM Resorts International furloughed tens of thousands of workers and began layoffs. Days later, it gave outgoing CEO Jim Murren, who left to head Nevada’s coronavirus task force, a $32 million exit package. The payout sidestepped the terms of his original contract, which entitled him to nothing if he left voluntarily.
MGM didn’t directly address the exit package but said at the time that the board sped up the transition, announced the prior month, because it “believes continued steady, skilled leadership is needed in this time of great upheaval and uncertainty.”
Whatever the case, companies must weigh past promises against public perception, says Aalap Shah, a partner at Pearl Meyer, an executive-pay consulting firm.