Posted: December 22, 2020
The COVID-19 pandemic has completely flipped the private sector on its head this year. The virus has caused sporadic shutdowns, created an unlevel playing field, and destroyed some industries while boosting others. However, there is light at the end of the tunnel now that a vaccine has been approved for distribution. After one of the rockiest years in history, should America’s executives expect everything to just return back to normal now that we have a vaccine? Or should they still start prepping financially for their salaries to be slashed? This article will cover the COVID-19 vaccine and its implications on corporate America and executive salary practices.
To get an idea of how executive pay might be impacted by COVID-19, it is important to first understand how businesses themselves have been impacted. For example, for the majority of the year, many businesses that were deemed “non-essential” have been forced to either shut down their businesses entirely or continue at a limited rate. This will lead directly to a loss of revenue which could negatively impact executive compensation. There were a few ways that companies suffered losses in 2020 apart from just a loss of revenue. For starters, some companies suffered losses from perishable inventory that could not be used due to delays caused by COVID-19. There were also plenty of pending orders that were canceled due to decisions brought on by COVID-19. This could mean huge future bulk orders that were canceled and future revenue that the company can no longer rely on. On top of that, there could have been costs incurred by a company’s failure to perform legally binding agreements in consequence of COVID-19. Lots of these losses have already been incurred and a vaccine is not likely to be a quick fix. As companies across the country are still treading water financially, it may take over a year to make up for this lost ground. Let’s take a look at how these business losses could impact executive pay.
According to a Harvard Law School forum, there are a few ways that executives can expect their compensation to be adjusted moving forward. Keep in mind that each company is run differently and has had a different experience during the pandemic which will impact their decision making. Despite the new COVID-19 vaccine, there will most likely be salary cuts across the board in 2021. This would partly be done to make up for lost revenue in 2020 and in preparation for a tentative 2021. It could take a few months for the vaccine to be widely implemented and for consumer confidence to return. Other adjustments that could be made to executive salaries across the country are through bonuses, performance-based long-term incentives, and stock options. Unless your business naturally thrived during the coronavirus (like Zoom or Netflix) then you most likely fell short of your 2020 goals and bonus incentives. However, longer-term compensation like stock options are still very much within reach assuming the vaccine leads to a return to normalcy.