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CEOs promised to take pay cuts during the pandemic. Did they?

August 31, 2021, 2:30 PM UTC

When the pandemic struck last year, many CEOs across the globe announced they’d cut their own salaries. Now that we’re 17 months into this crisis, it prompts the question: Did business leaders go through with this pledge? While the COVID-19 recession was among the hardest initial economic shocks ever experienced, it was also followed by one of the fastest economic recoveries on record. Some businesses even boomed during the pandemic. 

To see how many companies followed through on their leadership pay cuts, Fortune partnered with Diligent, a leading New York–based SaaS GRC (governance, risk, and compliance) company. For the analysis, Diligent looked at Russell 3000 companies—an index of the largest 3,000 U.S. companies by market capitalization.

Here’s what the data shows.

The numbers to know 

3.4%

  • …How much the median total granted compensation of Russell 3000 CEOs rose in 2020. That median total comp was $5,130,681—up from $4,961,452 in 2019. 

647

  • …The number of Russell 3000 companies that publicly announced they’d reduce base salaries of their chief executive last year. 

512

  • …The number of Russell 3000 companies that followed through on cutting their CEO’s 2020 base pay.

96

  • …The number of Russell 3000 companies that followed through with the exact pay cut they publicly announced.

135

  • …The number of Russell 3000 companies who saw their CEO base pay rise (117) or stay flat (18) despite announcing last year they’d cut it. 

The big picture

  • For the most part, companies went through with their 2020 pledge to cut CEO pay. Among Russell 3000 companies, 647 announced top executive pay cuts last year. Of those companies, 79% went through with it. Of course, base pay is far from the whole package: The stock market rebound last year helped on the equity side of their compensation.
  • The pairing of a recession and pandemic didn’t stop CEO total compensation from rising. Among Russell 3000 CEOs, median total comp rose 3.4% in 2020. 

A few deeper takeaways

1. The CEOs of Hilton and Marriott were in the minority last year.   

The onset of the pandemic absolutely crushed the leisure and hospitality business. By April 2020, the sector had lost 49% of its jobs. In response to that freefall, several CEOs in that industry announced they’d forgo their 2020 salary entirely. That included Hilton Worldwide Holdings CEO Chris Nassetta and Marriott International CEO Arne Sorenson.

Sorenson, who has since passed away, delivered this heartfelt message to his staff while announcing the measure: “I can tell you that I have never had a more difficult moment than this one. There is simply nothing worse than telling highly valued associates, people who are the very heart of this company, that their roles are being impacted by events completely outside of their control.”

These CEOs were clear outliers. Among the Russell 3000, just 3% announced cutting CEO salaries by 90% or higher, while the vast majority of the announced cuts were under 50%. At the end of the day, cutting CEO base pay has a minimal effect on the bottom line. However, it does send a message to employees. 

2. Few companies hit their exact pledge. 

Among Russell 3000 companies that said they’d cut CEO pay, 79% went through with cutting it. However, only 15% hit the number they announced. (The chart above is for the latter).

What’s notable? Despite many companies not going with their exact pledge, there has been very little pushback. This might have been a different story if the worst COVID-19 recession forecasts had stuck. Instead, the economy has flipped into strong growth—with the unemployment rate falling from 14.7% in April 2020 to 5.4% as of July 2021.

I’d love to know what you think of the newsletter. Email me with feedback at lance.lambert@fortune.com.

Lance Lambert
@NewsLambert

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