By Jean Eaglesham and Inti Pacheco
Cheesecake Factory Inc. furloughed about 41,000 hourly
restaurant workers to conserve cash in the coronavirus pandemic. It
also cut pay for other employees by as much 20% -- a reduction that
Chief Executive David Overton matched for his $995,000 salary.
At Yum Brands Inc., Chief Executive David Gibbs is forgoing his
$1.2 million salary for the rest of this year, using the money in
part to pay one-time $1,000 bonuses to managers of company-owned
restaurants in its KFC, Pizza Hut, Taco Bell and The Habit Burger
Grill chains.
As corporate America reels from the pandemic, senior executives
are taking markedly different approaches to sharing the economic
pain suffered by employees, a review by The Wall Street Journal
found.
Chief executives at 184 companies within the S&P Composite
1500, comprising the biggest public corporations, have announced
temporary reductions in their salaries, ranging from 10% to 100%,
with a median cut of 50%, according to the Journal's analysis of
data from research firm MyLogIQ and securities filings. Of the 106
companies that have reported furloughing employees, 17 haven't
announced CEO salary reductions, the analysis found.
A spokeswoman for The Cheesecake Factory declined to comment.
Yum said in a statement that Mr. Gibbs believed giving up his
salary "was simply the right thing to do during this unprecedented
time."
The salary cuts that have been reported appear less dramatic in
the context of the executives' overall compensation: the roughly
$91 million tally of CEO salary reductions is less than 10% of
their $1.57 billion total annual compensation including equity
awards, the value of which can fluctuate, the Journal's analysis of
the latest available data showed. For Cheesecake Factory's Mr.
Overton, the 20% pay cut was equivalent to 3% of his $6.7 million
total compensation last year.
The stock and bonus payments that typically account for the
majority of senior executive compensation will likely fall this
year because of the crisis. However, stock or option awards being
made now at low prices may offer the prospect of longer-term
gains.
For most senior executives, salaries are only a small portion of
their pay. Robert Iger, the executive chairman of Walt Disney Co.,
is temporarily forgoing all of his $3 million base salary to help
"shoulder the burden" of the coronavirus's impact, the Burbank,
Calif., entertainment giant said last month. Tens of thousands of
Disney hotel and theme park workers this week began unpaid
furlough. The cut for Mr. Iger equates to 6% of his $47.5 million
total compensation last year, securities filings show. Most of last
year's compensation was based on measures such as movie sales and
theme park revenue, which will be far lower this year.
The median CEO compensation in 2019 was $12.8 million for the
357 of the S&P 500 companies that have so far reported this
data, up from $11.7 million for the same group in 2018 and on pace
to set a record if the pattern holds, according to a separate
Journal analysis of proxy filings. The median ratio of chief
executive pay to that of the typical employee was 168 to 1 for
these companies, up from 157 to 1 in 2018.
Executives at companies that may not survive the pandemic could
be reluctant to sacrifice their salary. Jill Soltau, chief
executive of J.C. Penney Co., which put most of its 85,000
employees on unpaid furlough this month, has not taken a cut to her
$1.4 million salary. The embattled retailer is in advanced
bankruptcy talks, the Journal this week reported. A spokeswoman for
J.C. Penney declined to comment on Ms. Soltau's salary.
The $2 trillion economic-rescue package signed into law last
month has stepped up political oversight of executive pay. Some
federal aid intended for companies restricts compensation in ways
that could affect executives more than their voluntary salary
reductions.
Gary Kelly, the chairman and CEO of Southwest Airlines Co., said
he is taking a temporary 20% cut in his $750,000 salary -- one of
the lowest percentage reductions among major U.S. airline chiefs,
according to the Journal's analysis.
Southwest this week said it had completed an agreement to
receive $3.2 billion under a federal assistance program designed to
help prevent layoffs in the airlines industry.
The money comes with strings attached. Southwest is getting aid
under a section of the Coronavirus Aid, Relief, and Economic
Security Act that caps compensation for high earners at $3 million
plus half of the amount over $3 million that they earned in
2019.
Depending on how the rules are drafted, that could mean Mr.
Kelly's pay could be capped at $5.9 million, less than the $8.8
million he got last year and his earnings in each of the three
years before that.
A Southwest spokesman said Mr. Kelly hasn't had a salary
increase since February 2017, and his compensation last year
included more than $6.3 million in stock awards. The spokesman said
the company "defers to the Treasury Department with respect to how
any limits on compensation will be calculated."
Rather than cutting executive pay, some companies are holding it
back until certain requirements are met. The top 300 executives at
Ford Motor Co. are deferring 20% to 50% of their salaries for at
least five months starting May 1.
They will get paid only after the auto maker, which has shut
most of its manufacturing world-wide, has repaid about $7 billion
of the extra debt it has taken on to manage through the crisis,
according to the company. This structure "functions as an
incentive," a Ford spokesman said.
For rank-and-file employees, their own pay matters more than any
salary cut by executives.
Leain and Kimberly Vashon, who both work at the Paris Las Vegas
Hotel and Casino, have been furloughed by employer Caesars
Entertainment Corp. Their two weeks of furlough pay has run out,
leaving them "trying to make a decision as to whether to pay bills
or get food," said Mr. Vashon, a bellman captain and union shop
steward.
When Caesars last month closed its properties and furloughed
most of its employees, the company didn't announce salary cuts for
its senior executives, many of whom are slated to leave the company
following a planned acquisition this year by Eldorado Resorts Inc.,
according to securities filings.
When the Journal asked for a comment, a Caesars spokesman said
senior executives would be donating to an employee hardship fund.
.
Mr. Vashon, who said he has worked for Caesars for 40 years,
would rather get more cash than have executives take salary
cuts.
"I'm not looking for symbolism," Mr. Vashon said. "What would
help is if [the executives] stepped up to the plate and did the
right thing by their workers."
--Lisa Schwartz contributed to this article.
Write to Jean Eaglesham at jean.eaglesham@wsj.com and Inti
Pacheco at inti.pacheco@wsj.com
(END) Dow Jones Newswires
April 24, 2020 14:08 ET (18:08 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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