May 11, 2020
Farient CEO Pay Ratio Tracker Update – May 11, 2020
Travel Companies in Peril: Pay Ratios of Norwegian Cruise Line Holdings and TripAdvisor
Welcome to the ninth installment of Farient’s Pay Ratio TrackerTM update. Each week, we focus on the companies with the highest and lowest CEO-to-median-employee pay ratios. This week, we explore the highs and lows of the last week of April’s pay ratio disclosure with Norwegian Cruise Line Holdings (NCLH) and TripAdvisor (TRIP). As a reminder, the CEO-to-median-employee pay ratio is one of the provisions from the 2010 Dodd Frank Wall Street Reform and Consumer Protection Act implemented in 2018.
Norwegian Cruise Line Holdings: Titanic Pay at Sinking Cruise Line
Norwegian Cruise Line Holdings (NCLH) is one of the largest cruise lines in the world, with annual revenues of over $6 billion. Last week, the Company reported a pay ratio of 1,052:1, just days ahead of reports that the Company may face liquidity issues in the wake of the current global health crisis resulting from COVID-19.
These Are Uncharted Waters
NCLH’s median employee is a full-time “shipboard” worker who lived outside the US and makes $16,925 annually. In its pay ratio disclosure, the Company is careful to remind investors that shipboard employees receive many additional benefits including meals, lodging and medical care while aboard the ships, and typically work only 8-10 months out of the year. It is important to note that next year, NCLH’s pay ratio will likely be exacerbated by the global health crisis, which may preclude shipboard employees from working for the majority of the year, driving median employee compensation down.
Additionally, following a precipitous 80% stock price plunge since the beginning of the year, NCLH announced that the 10% of its workforce who are “shoreside” employees will be taking a 20% pay reduction. The company has not yet announced any actions related to CEO or executive compensation.
TripAdvisor: Beware of Hidden Costs
TripAdvisor (TRIP) is a $1.5 billion online travel company best known for its user-generated reviews and price comparison tools. Last week, the Company reported a pay ratio of 13:1. Stephen Kaufer, co-founder and CEO, was awarded $1,260,637 last year, and continues to elect not to participate in the Company’s annual equity plan. Instead, Kaufer is awarded large equity grants every four years, which are intended to serve as his long-term incentive compensation. If one were to amortize Kaufer’s last equity grant of roughly $42MM in 2017 over the intended four-year period, his total compensation last year would come to nearly $11.8MM, resulting in a modified, significantly larger 2019 pay ratio of 125:1. In contrast to NCLH, TRIP has announced that Kaufer will forego his entire base salary through the end of 2020, which will likely drive the Company’s pay ratio lower. For reference, TRIP has seen roughly a 40% loss in stock value since the beginning of the year.
Each week, Farient highlights the many factors that influence a company’s pay ratio, encouraging readers to look beyond the obvious. The global COVID-19 crisis continues to have a tremendous impact on many aspects of life and business, and has once again brought CEO pay to the public’s attention. Although companies’ pay ratios may not reflect the impact until next year, the crisis is a reminder to investors to be on the lookout for all factors at play and to widen their perspectives when making decisions and drawing conclusions.
Farient‘s CEO Pay Ratio Tracker™ provides updates on CEO to median employee pay ratio throughout the proxy season. In addition, for real-time information on Say on Pay votes, please visit our Say on Pay Tracker™ at Farient.com.