In a Hot Job Market, Companies Hand Out Big Awards to Retain Key Executives

Companies including

Coca-Cola Co.,

Hewlett Packard Enterprise Co.

and

Tyson Foods Inc.

during the 2021 fiscal year provided supplemental awards to senior executives, according to proxy filings. The awards, mostly made in the form of stock and often worth millions of dollars, are designed to motivate executives and encourage top talent to stay in their jobs. Some awards also replaced compensation that executives didn’t receive due to the economic shock caused by the pandemic.

The median compensation package for CEOs of S&P 500 companies was $14.7 million in 2021, a sixth straight annual record, according to a Wall Street Journal analysis. Equity awards made up about two-thirds of the packages and more for the highest-paid chief executives.

“The level of anxiety and stress across the organization, surprisingly from the CEO to the manufacturing floor, has been unprecedented,” said

Bill Glenn,

executive chairman of Crenshaw Associates, a human resources advisory firm, discussing challenges facing leadership teams since the pandemic began.

Coca-Cola said in a March proxy filing that last year it authorized a one-time award for about 1,000 employees, including the company’s top executives. The stock award was “granted to motivate and reward employees” to help the beverage company emerge stronger from the pandemic, Coca-Cola said in its proxy filing.

Chief Executive

James Quincey,

who under the program is eligible for the largest award, could receive a maximum $6.4 million if the company reaches certain earnings-per-share targets by the end of this year. Mr. Quincey last year received total compensation of $24.9 million, a figure that includes the one-time stock grant, or 35% more than a year earlier. The company declined to comment beyond its proxy filing.

The stock awards that companies are disclosing in their proxy filings were largely granted in 2021, when the stock market was on a tear and companies were rebounding financially from the economic shock of the pandemic. Offering a supplemental award is one of several tools that companies use to encourage retention, including adjusting other types of compensation such as long-term incentive payouts.

“It’s a lot easier to make higher awards, or special awards, to senior executives when a company has strong performance,” said

Kelly Malafis,

a founding partner at Compensation Advisory Partners, an executive pay advisory firm. Investors may find them less palatable in the future if company performance or stock price declines, she said.

Investors last year criticized some companies for changing executive pay terms when existing performance-based pay targets appeared unreachable during the pandemic. Some investors withheld support for routine “say on pay” advisory votes at company annual meetings.

The way retention awards are disclosed in corporate pay disclosures makes it difficult to identify every instance of a retention award provided to an executive officer. Mercer, a consulting firm, identified 44 such awards granted in the 2021 fiscal year in a sample of 233 companies within the S&P 500. Most of the awards were provided to individuals or to a small group of executive officers, rather than to entire leadership teams.

Over a third of companies cited retention as the primary reason they offered a supplemental award to a chief financial officer, either individually or as part of a larger group, making it the most frequently cited reason, according to advisory firm

Willis Towers Watson

PLC, which reviewed a sample of 68 supplemental awards provided to finance chiefs in the S&P 1500. Other reasons included performance during the pandemic and an ongoing business transformation.

Stock awards with time-based vesting schedules, which executives receive for staying on the job for a period of time, made up the largest share of retention-related stock awards reviewed by Willis Towers Watson and Mercer. Investors have pushed companies to adopt compensation plans with performance-based incentives.

C-suite departures declined last year while workers across the country quit their jobs at record levels. Within the S&P 500, 9% of all named executive officers—the top leaders at a company—left their companies last year, according to MyLogIQ, a data provider. That’s down from 10% in 2020, during the first year of the pandemic, and 11% in 2019, MyLogIQ said. So far in 2022 through May 6, about 5% of named executive officers at S&P 500 companies announced their departures, according to MyLogIQ.

Technology company Hewlett Packard Enterprise said this year it provided its CFO,

Tarek Robbiati,

with a one-time equity award of $7.5 million, which includes both restricted and performance-adjusted stock. The award—provided solely to Mr. Robbiati, who has served as CFO since 2018, in addition to other increases in his salary and incentive pay—was meant to “promote his continued engagement during a very complicated multi-year strategic transformation,” the company said in its proxy filing.

Hewlett Packard Enterprise in 2020 launched a plan to cut real-estate expenses and simplify its product offering as part of a broader shift toward a subscription-business model. Shareholders voted 90.3% in favor of the company’s 2021 compensation package. Mr. Robbiati’s total compensation nearly tripled in 2021 compared with a year earlier, to $15.6 million.

“Tarek is a transformative leader at HPE, helping us deliver differentiated value to our shareholders and customers,” a spokeswoman said, adding that the company continually evaluates compensation for its senior leaders to ensure it is fair and competitive.

Some companies during the 2021 fiscal year offered stock awards intended to replace compensation that executives lost out on early in the pandemic. The awards followed efforts by companies in 2020 to trim executive salaries to demonstrate solidarity with investors and employees during early-pandemic layoffs.

“It throws into question the whole notion of shared sacrifice,” said

Amy Borrus,

executive director of the Council of Institutional Investors, referring to awards that replace compensation executives lost out on during the pandemic.

Meat processor Tyson Foods provided its executives with a supplemental restricted stock award during the 2021 fiscal year, the company said in a December proxy filing. The value of the awards was about equal in value to the decreased payout under the company’s incentive plan during the prior fiscal year due to Covid-19-related expenses, the company said. Tyson’s board determined that the additional stock award was appropriate based on the company’s improved performance in the second half of the 2020 fiscal year, as well as executives’ leadership in the face of the pandemic and the steps they took to safeguard employees, according to the filing.

Under the program, Chairman

John Tyson,

who received the largest award, received 17,781 shares with an estimated grant value of about $1.1 million. Mr. Tyson earned total compensation of $13.7 million during the 2021 fiscal year, up 22% from a year earlier.

The special stock award vests 50% each year over two years, “adding a retention element to the grant,” the filing said.

Say-on-pay proposals this year through April 28 received, on average, an investor approval vote of 86%, according to compensation advisory firm Semler Brossy.

Tyson shareholders in 2017 voted in favor of a proposal to cast say-on-pay votes every three years. The next vote is scheduled for 2023.

Write to Kristin Broughton at [email protected]