CEOs are slashing their executive pay to make a ‘visible personal sacrifice’

Good morning.

This is Katherine, filling in for Alan from London.

Yesterday, my colleague Emma Hinchliffe wrote about CEOs slashing their pay—usually to zero—in the midst of the coronavirus crisis.

The CEOs that have gone first, she points out, are ones that lead companies that have taken a direct, and early, economic hit—businesses, like tourism and hospitality, that have had to lay off or furlough hundreds of thousands of employees. Marriott, for example, and Hyatt. (If you missed CEO Mark Hoplamazian speaking to Fortune‘s Susie Gharib about this earlier this week, that interview is here.)

But companies that rely on staff or contractors putting themselves at particular risk—Lyft, for example—or those that work in media and entertainment—like Disney—have also been early movers, as have those that may seek government help.

The question of whether it makes a difference is a thornier one. Most executive pay comes in the form of stock options, so dropping a base salary may not require an executive to take a lasting financial hit. And in most large companies, even the CEO’s salary won’t make much difference in plugging the gap caused by the fall-out from coronavirus.

But sometimes optics aren’t just, well, optics. Last year, I spoke to Paul Collier, a professor at Oxford and author of the book The Future of Capitalism: Facing the New Anxieties, for our series on the ideas that will shape the next decade. He warned of lagging trust in executives, and made the case that even in times of relative stability, true leadership by a CEO requires making a “visible personal sacrifice”—including taking a pay cut.

Or as Michael Useem, a professor of management at the Wharton School, told Emma:

“People have long memories when it comes to what you did in a crisis,” he said. “Did you step forward, or did you refuse to help out?”

More news below.

Katherine Dunn

Source link

Comments Off on CEOs are slashing their executive pay to make a ‘visible personal sacrifice’