May 15, 2020

Agenda – Boards Risk Being ‘Tone Deaf’ on Director Comp

By Amanda Gerut

As proxy season approaches its climax next week, few boards have made decisions about how to approach equity grants that will be awarded to directors in conjunction with annual meeting dates. However, compensation consultants are warning about a failure to address the misalignment between the number of shares awarded to executives at the start of the year before the crisis impacted stock prices with the grants that will be made to directors in the coming weeks. That could inadvertently send a damaging message to executives and employees facing daunting circumstances, consultants say.

According to data from Farient Advisors, 11% of S&P 500 companies have announced cuts to CEO compensation and 9% of those companies have cut pay for other executives. Only 6% of S&P 500 companies have announced changes to board pay. Among the 31 S&P 500 boards that have announced board pay cuts, 23 explicitly state that they are cutting cash compensation, while only five companies refer to “compensation,” which could refer to cash or equity, says Eric Hoffmann, vice president of information services at Farient.

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