22 May 2020
Our community looks at voluntary reduction.
This month we decided to see what The Chartered Governance Institute and Core communities thought about remuneration in relation to the COVID-19 pandemic. When asked whether executive directors had taken a voluntary reduction in base salary 41% said yes with the majority of directors taking a 20% cut. Rather than taking a reduction, one respondent mentioned that directors in the company would not be taking their annual pay increase instead to cope with the strain. “While our executive directors haven't taken a pay cut, they have all opted to donate 20% of their salaries for the next three months to the National Emergencies Trust” one respondent said, and another stated that the: “Exec team waived 2020 bonus, 1/2 retained in business and half to homeless charities”.
When asked whether non-executive directors had taken a voluntary reduction in base salary, the majority said no at 56%. 30% of non-executive directors had taken a reduction with 19 of 27 respondents stating that they had taken a 20% decrease, three had taken a 25% cut and another three had taken between 30-33%. One respondent mentioned the non-executive directors had taken a 5% reduction whilst another was not applicable as they were unpaid. 14% were unsure whether they had taken a reduction at all. “Our salary/fee reduction is a voluntary donation to global charities fighting COVID-19 as opposed to a formal salary/fee reduction” one said.
When asked whether the management board had taken a voluntary reduction in base salary, the answers showed a stark contrast with 60% saying no, 31% saying yes and 9% being unsure. The majority of the reduction - 22 out of 27 respondents - fell into the 20% bracket with only one taking a reduction of 30% for three months. Similarly, when asked whether the company were planning to pay a dividend this year, 42% said no, 26% said yes and 32% were unsure.
On a scale of 1 -10, when asked how confident they were about their company surviving the financial impact of COVID-19, the majority of respondents scored a 10. Reassuringly, 8 and 9 scored the next highest, and only one respondent scored a one on the confidence scale. One respondent said: “No financial impact on our company at present although the subsequent recession will give its challenges” and another said: We are both small enough to manage the impact while large enough to be able to lose some revenue without collapse”.
Other answers included “Survival will depend on execution of a downturn plan”, “I work for a not for profit housing association and whilst we will see some reduction in our tenants' ability to pay, we are financially strong and need to continue delivering services. Our focus is therefore on supporting our vulnerable customers and employing safe systems of work for colleagues” and “The assessment of risks and opportunities has never been so important than during this crisis”.