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Big businesses are protecting exec pay by rewriting bonus plans and changing performance targets during COVID-19, a report has found

  • Big businesses are protecting executives' pay by rewriting bonus plans and changing performance targets, a report has found.
  • Companies have added non-financial targets and written off worst-performing months, Semler Brossy Consulting Group said.
  • For example, Olive Garden parent company Darden Restaurants modified its bonus plans so that lower sales at the peak of lockdown won't count against execs, the group said.
  • Many companies have cut employee pay and laid off staff, and adjustments that appear to protect executive pay "are likely to get outsized attention," Semler Brossy warned.
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Big businesses are protecting their executives' pay during the pandemic by rewriting bonus plans and changing performance targets, a report has found.

Some companies have simply written off the worst-performing months, while others have added non-financial metrics to bonus-linked targets, according to Semler Brossy Consulting Group's investigation of 29 large US firms, reported by the Financial Times.

Ten companies modified the period that performance is measured over, typically to cover just a partial year. This means that executives' annual performance won't be dragged down by poor performance during the peaks of the pandemic.

Many companies have cut staff numbers or employee pay, and adjustments that appear to protect executive pay "are likely to get outsized attention," the group warned.

Olive Garden parent company Darden Restaurants modified its bonus plans so that lower sales at the peak of lockdown won't count against exec bonuses, Semler Brossy said, per an SEC filing.

Its 2021 bonus plan will use non-financial metrics during the first half of the fiscal year alongside financial results from the second half, and the board will use its discretion to award bonuses, the FT reported.

Gene Lee, Darden's CEO, was among a number of executives who pledged to take pay cuts in the early days of the pandemic, an apparent act of solidarity with struggling workers.

Lee said he would forgo his $1 million base salary in early April. As of early June, SEC filings showed his salary had already been reinstated.

Casino operator Wynn Resorts, which runs the world's largest five-star resort, modified bonus goals for some executives for the second half of 2020 to encourage saving cash, rather than generating earnings, with "significantly reduced target incentive levels" for the year, the Semler Brossy report found, per an SEC filing. 

Both Darden and Wynn Resorts did not immediately respond to a Business Insider request for comment. Representatives from Wynn Resorts and Darden declined to comment to the FT.

The report found that, among the 29 large companies, new performance metrics included cash flow, strategic and operational health measures, and earnings before interest, taxes, depreciation, and amortization.

Semler Brossy argued that, while incentives are important to keep executives motivated, any rewards "must be proportionate and aligned with the broader impact of COVID-19 on shareholders, on employees, and on society at large."

Boards should acknowledge other stakeholders when planning their executive bonus programs, Semler Brossy said. 

"The media are actively looking for stories of corporate greed in a pandemic, and even innocuous seeming changes, such as shifting some performance-based awards to time-based vesting, have resulted in negative stories," the company added.

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