U.S. Firms Protect CEO Pays amid Crisis
Sonic Automotive, which operates 95 U.S. car dealerships, started laying off and furloughing about a third of its workforce. The coronavirus pandemic crushed its sales and stocks then changed its executives’ pay packages, handing them a multimillion-dollar windfall.
Regulatory filings show that, on April 10, Sonic’s board gave its top executives stock options to replace performance-based share awards. The options it gave Chief Executive David Smith, whose family controls the company, are now worth about $5.16 million.
Stock trading reports that the figure is over four times the value of the performance-based stock awards he got last year.
Meanwhile, some of Sonic’s terminated employees face hard times. Following a decade of buying and selling cars, Allan Nadohl, 74, said he was laid off in March. He now relies on U.S. government retirement payments that don’t fully cover his bills in Los Angeles.
Thousands of employees have suffered the same fate, as firms resorted to furloughing and laying offs. Nadohl said, be a “mensch”, referring to Sonic executives with a Yiddish word meaning honorable person. Take a 50% cut for six months, he added.
Without elaborating, they said the changes were made in response to the pandemic. Neither the company nor Smith responded to requests for comment.
Firms around the U.S. are moving to protect their CEOs’ pay as the pandemic hits workers and investors.
U.S. Firms Move to Shield their Executives’ Pay
Sonic is one of six U.S. firms that have moved to shield their executives’ compensation from the economic fallout. It had laid off or furloughed workers amid the virus crisis.
The others include plush toy seller Build-A-Bear Workshop Inc and restaurant operator Red Robin Gourmet Burgers Inc. retailer. The list also includes Signet Jewelers Ltd, DKNY owner G-III Apparel Group Ltd, and fracking sand producer Covia Holdings Corp.
Up to 75 other firms disclosed that they are considering changes to executive pay plans in light of the pandemic’s impact. Among them are Uber Technologies Inc, Hilton Worldwide Holdings Inc., Delta Air Lines Inc, Sirius XM Holdings Inc., and Thomson Reuters Corp.
For example, in an April 21 filing, Sirius XM said it may be prudent to change executive pay terms. This may help ensure it to attract and retain senior management talent.
Its performance measures no longer suited the “current reality,” Delta said in a filing. The value of executives’ incentive pay had declined by more than half in the pandemic crisis.
Sirius XM did not comment in response to requests from Reuters, while Delta declined to comment. G-III and Signet said the changes were needed to retain management talent.
Build-A-Bear said the moves aligned the interests of executives with those of shareholders in the stock market. Covia, Red Robin, Uber, and Hilton said that uncertainty arising from the pandemic caused them to revisit performance pay.
