Cash Compensation Changes in Light of the Current Economic Crisis

Abstract

This article focuses on cash compensation, which includes base salaries and annual bonuses (also referred to as “short-term incentives”). As of the outset of this current economic crisis (early April 2020), the state of change is as follows: Many companies have already begun reducing base salaries—particularly at the executive level and in some cases extending to outside directors and even the broadbased employee population; and, while the vast majority of companies (especially those with a calendar year end) have not yet made any changes to their short-term incentive plans that were put in place prior to mid-March, boards are likely to begin announcing plans to materially change the performance metrics, goals (or targets) and corresponding payout schedules used in these plans.

Keywords: Executive Compensation, Incentive, CEO

JEL Classification: G,J,L