While millions lost jobs, some execs made millions in stock
Even as millions of people have lost their jobs during the pandemic, the soaring stock market since the spring has delivered outsize gains to thewealthiest Americans. And few among the superrich have done as well as corporate executives who received stock awards this year.
Edward Stack, chief executive of Dick’s Sporting Goods, andWilliam Lynch, president of Peloton, are each sitting on paper gains of more than $60 million on stock-based awards they mostly received in the first three months of the year, based on Wednesday’s closing stock prices, according to an analysis by Institutional Shareholder Services, which advises investors on how to vote on corporate matters.
And Stéphane Bancel, chief executive of Moderna, a drugmaker developing a coronavirus vaccine, received options in February that have appreciated by nearly $30 million.
Thepay gains are a result of the sharp rise in the stock prices of these companies, which investors are betting are well-positioned to grow during the pandemic. Another reason these stock awards have appreciated so much is that some of the grants were made when the stock market was close to its lowest point for the year.
Of course, many executives are also sitting on gains on stock they got in earlier years.
But the surge in wealth also highlights how the compensation of senior executives is designed to give them enormous windfalls, which they have gotten even during one of the sharpest economic downturns in decades.
These gains are also a reminder that income and wealth in the U.S. economy are tilted heavily toward a tiny number of top earners who own significant amounts of stock. Most Americans own little or no stock, according to a recent FederalReserve report, and many had less in savings in 2019 than they did before the last recession a decade ago.
“The stockmarket is not an indicator of the health of the economy for working people; it’s an indicator of economic inequality,” said Brandon Rees, deputy director of corporations and capital markets at the AFLCIO.
For decades, corporate boards have tried to tie executive pay to the performance of the company’s stock in an effort to make managers more accountable to shareholders. Yet executives still often endup doing far better than might be justified by a company’s fundamental business performance.
Stack’s compensation shows how top executives can rackupsuch large gains so quickly.
In March, when the stock market was close to its low point and the share price for Dick’s Sporting Goods was also at a nadir, he received 355% more stock options for his 2020 award than for his 2019 grant and 142% more restricted shares, according to the ISS analysis and the company’s securities filings.
Businesses often hand executives stock in two forms: stock options or restricted shares. An option usually provides its owner the right to acquire company stock at a future date at the price it was trading on the day it was issued. A restricted share is stock that executives cannot sell for months or years.
When asked to explain how the company arrived at Stack’s 2020 stock grants, it said in a statement, “As in prior years, the compensation committee considered a number of factors, including the company’s 2019 performance.”
Then, everything started to move in Stack’s favor. Investors, believing that Dick’s could profit in the pandemic economy and encouraged by stimulus from Congress and the Federal Reserve, bid up the price of the company’s stock.
But because Stack had far more shares in the 2020 stock grants than he did in 2019, the overall value of the awards has ballooned. The 2020 awards were worth about $7 million when theywere issued and are now valued at a combined $67.4 million.
By contrast, Stack’s 2019 awards are worth $15 million at Wednesday’s stock price.