Investors and stakeholders alike have sought to gain greater transparency into executive pay structures in recent years, launching Say on Pay shareholder proposals, a mandate for public companies to allow investors to reject excessive C-suite pay, and demanding data around pay scales.

Looking ahead to the 2023 proxy season, executive pay will yet again be in the spotlight as Pay Versus Performance, a rule that requires companies to disclose executive compensation in relation to firm performance, takes effect for the first time. Unless various activist investors get their way, companies face relatively low risk from investor backlash on executive pay; Say on Pay votes in the Russell 3000 received 96.5% in 2022 and and 97.2% in 2021 of majority support, according to Semler Brossy, an executive compensation consulting firm.

In the months since, many board compensation committees have hired a consultant to do a deep dive into its executive data, Joan Conley, senior advisor on corporate governance and ESG programs at Nasdaq, told CFO Brew. Since finance chiefs are responsible for overseeing SEC filings and often have investor relations under their wing, the change in pay disclosure rule will fall into their organizational purview.

The proposal has led boards and their hired consultants are working to answer the questions of “Is this [data] comprehensive enough? Are we giving the shareholders enough?” said Conley. “So that’s one regulatory initiative that really everyone is heads down, pencils are moving, computers are turning data, to create that.”

In recent years, executive pay metrics have caught the attention of wider audiences, especially the CEO-to-typical-worker pay ratio. Continue reading here.—KT

It seems like the past six months have seen major companies making layoff announcements one after another. From the tech world (most notably Twitter) to investment banks such as Goldman Sachs and Morgan Stanley, companies are once again looking at ways to cut costs.

But there’s been one piece of information that hasn’t been widely shared by companies shrinking their workforces: how executives are personally sharing in financial loss, whether through a pay reduction or other means.

Layoffs affect not only the employees who were let go, but the company’s remaining workers as well, and now another stakeholder group may also be watching more closely: consumers. Oxford University researchers found in a study published in 2021 that consumers prefer firms that prioritize paying employees over CEOs during a financial crisis. The study, which specifically polled retail worker wages, wrote that a “firm’s commitment to maintaining employee pay leads to the most positive consumer reactions.”

CFO Brew reached out to BigCommerce, Thumbtack, Blue Apron, Airtable, and Plaid, all of whom laid off employees in December 2022, seeking comment on whether executives would be taking pay cuts, and if the company had considered such cuts as a way to reduce costs before laying off employees. Most of the companies did not respond to our request for comment; Plaid declined to comment.

C-suite execs taking pay cuts for events out of their control is not a foreign concept; many top executives forfeited their salary, in some way shape or form, during the Covid-19 pandemic. In 2020, Dick’s Sporting Goods CFO Lee Belitsky’s pay was cut 50% ($686,200 in 2019) at a time when the company closed over 800 stores across the country. In 2021, his salary was reinstated and raised to $794,375, per the company’s proxy filings. In Germany, Puma CFO Michael Laemmermann forfeited his April 2020 salary, along with the CEO and chief sourcing officer, in line with the announcement that general managers would also be taking a cut. More CEOs versus finance chiefs made public salary cut announcements, but the CFO tends to avoid the spotlight even in more positive announcements.

The market will have to wait for annual filing time to uniformly compare executive salaries from 2022–2023, but we have yet to see any executives sharing in the cost-cutting pain this time around.—KT

Over the past few years, as executive pay has come under a spotlight, ESG advocates have pushed for executive pay to be linked to wider social themes such as climate action, DE&I initiatives, and governance metrics. CFOs, like other executives, may be increasingly looking at having their compensation tied to broader goals outside of pure financial reporting.

In November 2022, a report from the Harvard Law School Forum on Corporate Governance found that “the vast majority of S&P 500 companies are now tying executive compensation to some form of ESG performance.” That’s not to say that executives are bringing down atmospheric temperatures; most of the links between performance and ESG to date have been in the “S,” or social sector—namely diversity, equity, and inclusion goals—according to the report.

Fernando Tennenbaum, Anheuser-Busch’s CFO, told CFO Brew that his compensation was linked to ESG metrics, where he is now responsible for targets that traditionally were outside of the finance chief’s domain. If reporting teams begin to move under finance teams in an organization chart, it would make sense that CFOs begin to take more responsibility for the ESG outcomes.

Linking compensation to ESG metrics is not necessarily easy; however, it takes time to develop reliable data, according to the Harvard report. Also, others point to it as being used as a box-ticking exercise to deflect scrutiny, Alison Taylor, clinical associate professor at NYU Stern School of Business, told CFO Brew over email. “Incentives are not being designed with actually improving ESG performance in mind,” Taylor said.—KT

Stat: 6,021. That’s the number of cars that luxury automaker Rolls-Royce said it sold in 2022, the most in its 119-year history, and 8% more than the year prior. The increase in demand was driven by customers in the US, Rolls-Royce’s largest market. (Financial Times)

Quote: “It may be a normal business practice, but this is not how a responsible enterprise should behave.”—Zhang, a Tesla owner in China, where owners of the electric vehicles are complaining that they missed out on recent price reductions. (CNN)

Read: Companies in the travel, leisure, and entertainment industries may be reluctant to reduce headcount if the economy enters a recession, meaning blue-collar workers might not bear the brunt of the layoffs like they have in past economic downturns. (the Wall Street Journal)