Were CEO Pay Cuts During Covid-19 Merely Symbolic? Shareholders’ Reaction and Outrage

We examine a firm’s decision to announce a cut to CEO pay in response to challenges arising from the COVID-19 pandemic. The rationale behind these announcements and the extent of the pay cuts, however, have been widely questioned. Specifically, we examine whether the announcement of a CEO pay cut is merely symbolic and made to appease various stakeholders, with no actual change to the CEO’s realized total pay. We find that COVID-19 related CEO pay cut announcements are associated with a lower CEO salary but not total CEO pay. In fact, our results suggest that firms which announced a pay cut substituted salary reductions with increases in cash bonuses. We also investigate shareholders’ approval of executive compensation and find a lower rate of shareholder dissent if a firm announced a COVID-19 induced CEO pay cut. However, this effect is reduced if the CEO received higher total pay or dividend payments increased whilst the firm received COVID-19 government subsidies