Covid 19, Pay And Incentives, Purpose Strategy Culture And Values

Is talking about pay rises and bonuses a dirty subject during COVID-19?

May 20

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2 min read

When did you last review your risk register? Crises are inevitable, some are preventable, and many can be mitigated through good governance.

It is a fact that those employees on the front line are often lower paid and there is a lot of discussion about the value of these roles to our society and how they should be rewarded going forwards.

Given that remuneration of executives at listed companies is usually one of the most contentious subjects, many Boards and Remuneration Committees are dealing with the headache of how to deal with pay and reward structures when the difference in wages is probably more topical than ever before. But the reality is despite the many who are less well paid, the wheels of society will not function without a thriving economy and so this subject is relevant and one that needs to be had. My view is more about having a discussion on why people are remunerated.

We have seen a trend in CEOs taking COVID-19 pay cuts and while this is admirable it does beg the question of how future proof this approach is. Many executives are working longer hours with the most difficult decisions they have had to make during the course of their careers and in normal circumstances we would want to reward them for this.

Many companies are currently trying to navigate the granting of awards for share plans and are wondering whether performance conditions should be changed. Companies are being urged to stick to existing processes as any alteration could be viewed as ‘gaming the situation’.

Companies are being urged now to think about:

setting performance criteria for next year’s reward objectives and to consider whether any new non-financial criteria should be incorporated into existing reward structures;
how to communicate messaging so that it is clear that executives are ‘sharing the pain’ too;
whether their remuneration committee should have ultimate discretion over the awards and scale back at the point of vesting to avoid windfall gains;
not postponing share award grants as with changing guidance companies may find themselves in extended close periods; and
whether there is appetite to create new reward structures for all employees.

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