As the country responds to the coronavirus pandemic with citywide lockdowns and en masse social distancing, numerous businesses have closed, and millions of Americans are out of work. We’re in the midst of an economic crisis as well as a health crisis. One response, as companies work to figure out what path to take, is CEOs cutting their own pay to help protect companies from layoffs or closure.
From the airline industry to hotels to gyms, CEOs have announced that they are taking partial or full pay cuts. Delta CEO Ed Bastain said in a company-wide memo that he has cut his own salary “by 100% through the next six months,” and that the members of the board of directors have elected to forgo compensation over that time period as well. Others in the airline industry have announced similar declarations, including Alaska Air, United, and Allegiant.
Marriott CEO Arne Sorenson said in a message to associates that he is giving up his salary for the remainder of the year, and cutting the pay of senior management in half. Also suffering from lost hotel revenue, Hyatt announced that its CEO, Mark Hoplamazian, and board chairman Tom Pritzker are forgoing their salaries through May. Lyft cofounders John Zimmer and Logan Green said they would donate their salaries to their company’s efforts to support drivers during this crisis, and Bahram Akradi, CEO of Life Time, which has 152 health clubs across North America, along with the company’s leadership team, have taken an indefinite pay freeze.
“We started the freeze for myself and the executives immediately. The moment we knew that the clubs were going to shut down we stopped paying ourselves so we have all the ammunition ready to try to take care of our employees as long as possible,” Akradi says. “The goal I have is to make sure we carry our team members to the other side of the situation.”
Akradi didn’t specify the total number he and his leadership team will be forgoing, but says that “we are taking zero pay, we’re not taking anything . . . for as long as this situation stands.” The company has committed to paying its 38,000 health club employees their full pay through the end of March. Akradi has held off on making additional business decisions, he says, to see if a government plan for protecting companies and American workers will be put in place soon, and what that will specifically entail.
Don’t be too impressed by the generosity, though. CEOs are only cutting their base salaries, which don’t completely reflect their overall compensation. Bastain, for example, received a 2018 base salary of around $900,000, Atlanta Business Chronicle reports, while his overall compensation from stock awards and options totals nearly $15 million. United CEO Oscar Munoz and president Scott Kirvy are also forgoing their base salaries through at least June 2020; in 2018, Munoz earned $1.25 million as CEO, along with a $3.8 million cash bonus, according to Crain’s Chicago Business. Other CEOs have only been willing to give up a percentage of their salaries, such as Southwest CEO Gary Kelly—who announced that he is taking a 10% pay cut. Kelly’s 2018 salary was $750,000, and his total compensation was $7.7 million, Dallas Business Journal reports.
Writing in Harvard Business Review, Atta Tarki, Paul Levy, and Jeff Weiss urged business leaders to review all the options before resorting to layoffs because of the coronavirus crisis, and, if they enact cutbacks to save losses, to “lead by example and do cut backs that impact your own day-to-day as well.”
“If you don’t, there is a danger that your staff will feel like saps, doing sacrifices while the C-suite continues unaffected,” they write. “Get a commitment for a pay cut from your senior leaders. As CEO, you should take the largest salary cut yourself.” Akradi echos this and says that on a recent call with other CEOs and CFOs, “just about everyone” had done the same as him. “I think it’s an expectation from any good leader, to know when it’s time to sacrifice themselves for the people,” he says. “It should be a quality of anybody who’s leading a large number of people.”