Many companies promised to cut CEO pay during the pandemic. But there have been suspicions and reports suggesting many chief executives failed to share the pain suffered by vast numbers of employees.

And now another set of figures shows many corporate leaders ducked a cut in overall pay. After examining companies listed on the Australian stock exchange (ASX), researchers from Sydney found that, while many CEOs saw their salary cut back in 2020, their overall pay, thanks to incentives arrangements, remained intact. Pay cuts, they suggest, were largely “symbolic”. They add that shareholders, when they saw the remuneration reports, were “outraged”.

The team writes: “We document that CEOs of firms that announced a CEO pay cut had a reduction in base salary and an increase in bonus pay.” They add: “The overall conclusion from our results is that whilst firms announcing a CEO pay cut were ‘true to their word’ in cutting CEO fixed salary, the cuts in CEO base pay were largely symbolic as they were offset by increases in other components of remuneration.”

The findings chime with research earlier in the year that accused US companies of engaging in “fake cuts” to CEO pay levels, because perks more than made up for losses.

In the latest probe, the team at University of Technology Sydney looked at 252 ASX firms with turnovers greater than AUS$100m. Of those, a quarter announced cuts to CEO pay as the pandemic unravelled.

The study shows that 61.9% of CEOs who announced a pay cut saw a reduction in their total pay (a mean reduction of AUS$153,765). Of those, only 57% saw their incentive pay reduced, while only 47.6% saw shrinkage in their cash bonus (a mean reduction of AUS$148,624).

The researchers write that the evidence points to many CEOs following through with a cut to their salaries, but “some CEOs were able to reap higher total pay from other components such as the incentive pay component”.

Ironically, the study finds that of those CEOs who did not announce a pay cut, 46% saw a reduction in their overall pay.

Shareholder reaction

There’s more. Shareholders reacted to what CEOs were doing once they had sight of remuneration reports. Shareholders were more likely to approve remuneration reports where a CEO pay cut was announced, except where overall CEO pay actually rose.

“This result indicates that shareholders were outraged at firms that made CEO pay cut announcements and also paid higher levels of realised total CEO pay,” the team writes.

There was another shareholder reaction. Where companies paid a dividend, their remuneration reports were more likely to be waved through by shareholders. However, shareholder approval for pay fell if the company also took government support for employee wages during the pandemic.

The Sydney team’s research adds to growing evidence that, in many cases, CEOs failed to really share pay discomfort felt by many employees despite public statements that they would.

In March, another Australian research team concluded that CEOs of listed companies on the New York Stock Exchange and Nasdaq had engaged in “fake cuts”. An examination of figures showed some chief executives saw an average increase in compensation “other” than salary of 131%.

“We uncover a widespread fake cuts phenomenon,” the team wrote, “where CEOs who ostensibly accepted reductions to their base salary ultimately received total compensation in 2020 that was no lower than their remuneration for 2019.”

Is it the same in the UK?

Questions have been raised about UK CEO pay levels, though it is harder to question what happened after pledges were made to cut CEO pay in the wake of the pandemic.

When, in May, the High Pay Centre think tank looked at FTSE 350 CEO-worker pay ratios, they noted that, in many cases, these had returned to pre-pandemic levels: 63:1, on average, in reports this year compared with 34:1 for the same sample in 2021. The figures show, the centre suggested, that “in some cases at least, the Covid-19 pandemic has not brought about long-term restraint”.

High levels of CEO pay will continue to be a target for campaigners and some investors, especially a few big institutions. But what did or did not happen during the pandemic adds a particular poignancy to the debate. As the evidence mounts, campaigners will gather the ammunition.