What's Market: Checking in on Companies with COVID-19 Related Executive and Director Compensation Reductions | Practical Law

What's Market: Checking in on Companies with COVID-19 Related Executive and Director Compensation Reductions | Practical Law

An Article checking in on companies that previously disclosed making COVID-19 related reductions in executive and director pay. This Article includes a sampling of SEC filings disclosing the compensation reductions with links to these filings.

What's Market: Checking in on Companies with COVID-19 Related Executive and Director Compensation Reductions

by Employee Benefits and Executive Compensation
Law stated as of 08 Sep 2020 • USA (National/Federal)
An Article checking in on companies that previously disclosed making COVID-19 related reductions in executive and director pay. This Article includes a sampling of SEC filings disclosing the compensation reductions with links to these filings.
Beginning in March 2020, most US governors issued stay-at-home orders in response to the 2019 novel coronavirus disease (COVID-19) pandemic. These orders generally required citizens to remain at home other than when performing certain essential activities, such as going to the grocery store or to medical appointments. Many US companies that provide "non-essential" services faced declining revenues due to the pandemic and the resulting stay-at-home orders. Some of the hardest hit companies included:
  • Airlines.
  • Hotel chains.
  • Car rental or car share companies.
  • Restaurants.
  • Entertainment companies.
Many companies in these industries took steps to reduce costs during this period of economic uncertainty. One step many of these companies took was to temporarily reduce executive or director compensation. In May 2020, the article What's Market: Executive and Director Compensation Reductions in the Travel Industry analyzed the compensation reductions instituted by selected airlines, hotels, car rentals, and car share companies. In June 2020, the article What's Market: COVID-19 Related Executive and Director Compensation Reductions in the Restaurant and Entertainment Industries analyzed the compensation reductions instituted by selected restaurants and entertainment companies.
Beginning in late April 2020, state governors began gradually relaxing their stay-at-home orders, and although some areas have seen setbacks with rising case numbers, most states have continued to relax their stay-at-home orders. Many restaurants and entertainment venues have reopened, with certain restrictions, and airlines and car rental companies are serving more customers now than they were in the spring and early summer. However, most companies in the travel, entertainment, and restaurant industries continue to report much lower revenues than they did at this time last year.
Given the improved, but not fully recovered, economic outlook for companies in the restaurant, travel, and entertainment industries, this article checks in on the companies discussed in the May 2020 and June 2020 articles to determine which companies have:
  • Extended compensation reductions.
  • Restored compensation levels to pre-pandemic levels.
  • Made no changes to their previous compensation reductions.
The May 2020 and June 2020 articles:
  • Looked at seventeen companies (nine in the travel industry and eight in the restaurant and entertainment industries, respectively).
  • Found that, although there were variations among companies in the amount of compensation reduced, the positions affected, and the length of time the reductions were expected to last, the following trends emerged:
    • all seventeen companies reduced their CEO's base salary, in some cases by 100 percent;
    • a majority of the companies (thirteen of the seventeen) reduced base salaries of at least some other NEOs; and
    • almost half of the companies (eight of the seventeen) reduced their director compensation.
The companies all disclosed their executive and director compensation reductions in filings with the Securities and Exchange Commission (SEC), and the May 2020 and June 2020 articles included the relevant language from the disclosure.

Sample Disclosure of Compensation Restorations or Extensions of Compensation Reductions

Of the seventeen companies analyzed in the previous articles:
  • Four have disclosed compensation restorations in SEC filings.
  • Three have disclosed extensions of their compensation reductions in SEC filings.
  • The remaining ten have disclosed neither compensation restorations nor extensions of their compensation reductions (two of these companies included reduction end dates in their original disclosure that have now passed).
The chart below:
  • Includes disclosure from the seven companies that have either restored compensation after a reduction or extended a compensation reduction.
  • Provides a link to each relevant SEC filing.
  • Indicates where the relevant disclosure is located within the filing.
For information on other changes companies may have made to executive compensation in response to the COVID-19 outbreak, see Executive Compensation Actions to Consider During the COVID-19 Pandemic: Checklist. 
Company
Restoration or Extension
Compensation Disclosure
Relevant Filing and Link
Hilton Worldwide Holdings, Inc.
Restoration
Effective August 8, 2020, the temporary salary reductions that were implemented for our employees, including our named executive officers, in response to the COVID-19 pandemic will be discontinued. Our President and Chief Executive Officer will continue to forego his salary for the remainder of 2020.
Form 10-Q, filed August 6, 2020 – Item 5
Hertz Global Holdings, Inc.
Restoration
In light of the magnitude of the effort that has already been undertaken and will continue to be necessary from critical employees to operate with reduced resources, the Company restored the base salaries of those employees who had voluntarily reduced their salaries as a proactive measure to reduce costs in response to COVID-19's impact on travel demand, as initially reported in the Company's Current Report on Form 8-K furnished on March 26, 2020. Effective May 11, 2020, the base salaries of senior leaders will be restored to pre-voluntary reduction levels except that the Company's Chief Executive Officer, Kathryn V. Marinello, who had previously voluntarily forgone her entire base salary, has voluntarily agreed to a 10% salary reduction going forward. 
Form 8-K, dated May 5, 2020 – Item 7.01
Bloomin' Brands, Inc.
Restoration
On July 1, 2020, the Board resolved it would reinstate the salary of David J. Deno, Chief Executive Officer of the Company, effective from the pay period beginning June 29, 2020, in light of the number of restaurants that are now reopened. Mr. Deno had elected to forgo all base salary in excess of the amount necessary to cover required contributions to his employment benefits and related payroll taxes from the pay period beginning April 6, 2020 in light of the uncertainty and adverse business impacts of the COVID-19 pandemic. The Board had also agreed to forgo any cash retainer effective April 3, 2020, which compensation will also be reinstated effective immediately.
Form 8-K, dated July 1, 2020 – Item 5.02
Darden Restaurants, Inc.
Restoration
On May 26, 2020, the Board of Directors (the Board) of Darden Restaurants, Inc. (the Company) approved new compensation arrangements for Eugene I. Lee, Jr., the Company's President and Chief Executive Officer, to restore his base salary from the previously disclosed reduced level that has been in effect since March 23, 2020. Mr. Lee's base salary will be restored to $1,000,000, effective June 1, 2020. All other elements of Mr. Lee's compensation remain unchanged.
On May 26, 2020, the Compensation Committee of the Board approved new compensation arrangements for each of our other named executive officers (as defined in the Proxy Statement for our 2019 Annual Meeting of Shareholders) to restore their respective base salaries from the previously disclosed reduced levels that have been in effect since April 13, 2020. The other named executive officers' base salaries will be restored…effective June 1, 2020. All other elements of such named executive officers' compensation remain unchanged.
Form 8-K, dated May 26, 2020 – Item 5.02
United Airlines Holdings, Inc.
Extension (reductions previously lasted through June 30, 2020 and were extended through the remainder of 2020)
As previously disclosed, Messrs. Kirby and Hart have each waived portions of their base salaries in recognition of the impact of the COVID-19 pandemic on the Company's business and to lead by example. Mr. Kirby waived 100% of his base salary from March 10, 2020 through the end of the year. Beginning on March 16, 2020, Mr. Hart waived 50% of his base salary in his role as the Company's Executive Vice President and Chief Administrative Officer and, in connection with his transition to the role of President, has waived 100% of his base salary from May 20, 2020 through the end of the year. In addition, as previously disclosed, the Company believes it is extremely unlikely that the Company's AIP awards will pay out for 2020 because the design of this program requires the Company to have a profit in order to satisfy the minimum annual payment criteria. Additionally, under the design of the AIP, in addition to other Company performance requirements, payments would only be made to Messrs. Kirby and Hart for those years when our frontline employees receive a profit sharing payment. Finally, the role of Executive Vice President and Chief Administrative Officer was not replaced upon Mr. Hart's transition to the role of President.
Form 8-K/A, dated May 22, 2020 – Item 5.02
Hyatt Hotels Corp.
Extension (reductions previously lasted through May 31, 2020 and were extended through the remainder of 2020)
In response to the ongoing COVID-19 pandemic, the senior leadership team and directors of Hyatt Hotels Corporation (the "Company" or "Hyatt") have agreed to voluntarily reduce their compensation for the remainder of 2020. Pursuant to compensation waiver letters entered into with Hyatt (collectively, the "Compensation Waivers"): (i) our Executive Chairman of the Board of Directors, Thomas J. Pritzker, and our President and Chief Executive Officer, Mark S. Hoplamazian, have each agreed to reduce their respective base salaries to zero (except amounts sufficient to cover employee benefit premiums) through December 31, 2020, (ii) our Executive Vice President, Chief Financial Officer, Joan Bottarini, our Executive Vice President, Global President of Operations, H. Charles Floyd, and our Executive Vice President, Chief Commercial Officer, Mark R. Vondrasek, along with the other members of the Company's senior leadership team, have each agreed to reduce their respective base salaries by 20% through December 31, 2020, and (iii) each of the Company's directors has waived applicable cash retainers, committee fees, and any dividend equivalent payments with respect to compensation earned during the third and fourth calendar quarters of 2020, and have agreed to a delay of applicable annual equity retainers until such later time in calendar year 2020 as may be determined. Each of these compensation reductions is effective as of June 1, 2020. The compensation reductions will serve as an additional contribution to the Hyatt Care Fund, which has been established to assist colleagues with the most pressing financial needs during this time.
Form 8-K, dated May 20, 2020 – Item 5.02
Avis Budget Group, Inc.
Extension (reductions were previously being determined)
Base salaries for employees at the level of Vice President and above have been temporarily reduced by 10% and this reduction will also apply to Mr. Ferraro's and Mr. Hees' base salaries as described above until such temporary reduction is removed for such employees.
Form 8-K, dated June 15, 2020 – Item 5.02