Some CEOs took pay cuts in 2020 — but earned more

As the financial blow of the pandemic became a reality in the spring of 2020, Hilton Worldwide Holdings Inc. furloughed thousands of workers and eliminated 2,100 corporate positions.

The cuts also appeared to hit the Csuite: CEO Christopher Nassetta opted to forgo his entire base salary for the rest of the year, and five other top executives cut their base salary by 50% for four months.

Despite the salary cut, Nassetta’s compensation package more than doubled to $55.9 million in 2020, compared with $21.4 million in 2019, according to a report filed by Hilton with the Securities and Exchange Commission. His five top executives also took in higher earnings in 2020 — as much as double — compared with the previous year, the SEC filings show.

Why? The base salary that Nassetta waived represented only 6.5% of his total 2020 compensation, while most of his earnings were paid in stock and option awards, among other compensation, such as a 401(k) match and personal use of company aircraft. For the company’s other executives, base salaries represented about 19% of their total compensation.

This was not an isolated case. The financial crisis created by the pandemic prompted executives at hundreds of America’s largest publicly traded companies to voluntarily lower their own base salaries. They made a point of announcing these cuts in news releases and earning calls with analysts.

But this did little to save their companies’ money or boost employee salaries, financial experts say.

Most of the base salary cuts made by executives in 2020 were “a public relations gimmick” and “almost inconsequential,” said Lawrence Mishel, a distinguished fellow at the Economic Policy Institute who has studied executive compensation.

The announced cuts, experts say, could have been made to show shareholders, board members and employees that they were sharing the pain or to send a message to lawmakers who were being lobbied to approve federal grants and loans to airlines, hotels and other struggling business.

David Larcker, an accounting professor and executive compensation expert at Stanford University, described salary cuts by executives as “a good gesture,” but added that it “doesn’t mean that at the end of the day these guys are earning less compensation.”

Hilton representatives defend the company’s compensation decisions, saying most of Nassetta’s earnings came in the form of stock and options, some of which he could not cash out in 2020. Hilton officials also pointed out that stock awarded to Nassetta in the previous two years was expected to have no value in 2020 because the company did not meet specific financial goals.

As for Hilton workers, they experienced a 13% drop in their median annual salary to $37,798 in 2020, according to Hilton’s SEC filings.