Semler Brossy's Contributions to Agenda

In 2020, amid the vast economic uncertainty from Covid-19, CEO total pay levels were mostly unchanged year-over-year, with lower cash compensation partially offset by equity grants. As we look ahead and consider how the pandemic will affect pay levels for 2021, we anticipate three trends.

While the Covid-19 crisis has caused a significant increase in board workload, the increased responsibilities relating to environmental, social and governance (ESG) matters will continue.

The landscape for long-term incentive plan design has radically changed, as companies have largely replaced stock options with restricted stock as the main component of long-term incentives granted to executives. Research firm Equilar has found the percentage of S&P 1500 businesses granting options decreased from 79% in 2007 to 75% in 2012, while companies issuing restricted stock jumped from 80% to 92% in the same period.

Executive perquisites are one of the most overlooked aspects of the executive employment package during compensation committee meetings, and for good reason, executive compensation consultants contend. Except for outsize perks such as corporate aircraft use, perquisites are typically one of the smallest components of executive pay and thus attract less attention than other elements, such as long-term incentive plans and deferred compensation.

Actions driven by a set of shared principles, coupled with open lines of communication, will serve a board well - ensuring it can proactively and effectively address problems and take action with conviction, appropriately balancing and responding to internal and external pressures.