7 Current Post-Pandemic Compensation Developments

The past couple of weeks have shown us that compensation in a post-pandemic world may be less predictable than predicted. Mask mandates have loosened. Businesses that have been closed are starting to get back to work. Businesses that have been fully remote and beginning to explore hybrid and return-to-work models. Companies are addressing talent acquisition challenges with better pay. Equity compensation vesting schedules may finally be changing. ESG (Environmental, Social, and Governance) goals are getting more than lip service. DEI (Diversity, Equity, and Inclusion) metrics are becoming what we thought they would be before COVID-19 began. And executives somehow continue to be paid well despite some less than stellar results. Here’s a quick round-up of what we’re seeing and what we aren’t.

1. Businesses are getting back to work. Restaurants, theaters, live music venues, and other businesses shut down by social distancing needs are finally starting to reopen in earnest. This will invariably create pay pressure in hourly service positions and might be the first step in a new battle for hourly talent.
2. Employees are going back in to work. Many companies are bringing people back to the office. Some are using a soft touch to entice people back, others… not so much. PacifiCorp tells Portland employees to return to the office in less than 2 weeks or take pay cut
3. Pay rates may be starting to reflect the new market. I have had several clients tell me that it is harder than ever to hire key talent. They also argue that survey data is not reflecting the actual talent market. In addition, some banks have raised their minimum wage to $25/hour. We may finally be seeing the compensatory impact of changing how people work.
4. Equity Compensation vesting schedules are changing to correct a well-known problem. I have discussed before that equity compensation vesting schedules have basically not changed in more than 25 years. Basically, 3 or 4 years for RSUs and stock options. We are not seeing companies use 6 and 7-year schedules to align with long-term goals. We are also seeing equity plans with 1 and 2-year schedules to reflect the “bonus” intent for those companies. Stripe and Lyft Speed Up Equity Payouts to First Year
5. ESG goals and being a better company is kind of a “thing.” Environmental, Social, and Governance goals are the current buzzwords for executive compensation. According to Barclays, sustainability is leading the pack. The goals are growing in popularity around the world, nearly everywhere at the same time. It will take several years for companies to figure out the “formula” to cynically do just enough to get credit and not so much that it actually impacts change. Until then, we are likely to see some positive and interesting changes!
6. Treating all employees with the respect they deserve is seeing continued growth. DEI (Diversity, Equity, and Inclusion) has been on the radar for several years, but we’re seeing more companies actually do something about it. Executive pay is being linked to DEI, and more companies are finally getting their data and processes to see real movement. But check out this article about Starbucks questioning its motives, and this article on their disclosed program. 
7. Executives are still somehow being paid a lot even when performance may not fully justify it. I won’t rehash the following articles, but they are worth a quick read. CEOs are getting big bonuses, even when their entire industries have been basically shut down during the past year (CEO Pandemic Pay: ‘Heads I Win, Tails I Win Almost as Much’). CEOs are getting big bonuses even after cutting front-line employee pay, or even shutting down stores to avoid paying people. Kroger CEO Cut Workers’ COVID-19 Hazard Pay, Grabbed Record $22.4 Million Package Himself.

I know it is a lot to absorb. We are seeing changes. Some in the compensation profession are actually driving changes. We will have a lot to discuss as this year progresses and figure out what the New New Normal looks like. Until then, have a great week!

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including a resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or follow him on Twitter at @DanFutureSense.

Comments

[Ken]

I think the link in Development #6 is the incorrect one as it doesn't appear to have anything to do with DEI or Starbucks. Can that be updated?

Thanks.