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New study calls CEO pandemic pay cuts 'window dressing'

CGLytics CEO Aniel Mahabier joined Yahoo Finance Live to break down how the COVID-19 pandemic has impacted executive pay.

Video Transcript

SEANA SMITH: Now turning to a new study out looking into executive pay. Now this study is really calling the headline-grabbing CEO pay cuts a window dressing event. Here to talk a little bit more about this, we want to bring in Aniel Mahabier. He is the CGLytics CEO. And Aniel, it's great to have you on the program. I know you looked into CEO pay for people who are at the helm of Russell 3000 companies. Why do you call it window dressing and it's not something more significant?

ANIEL MAHABIER: Yeah, it's a good question. You know, the study that we've done is-- found that there are roughly 25% of the companies in the Russell 3000 did some form or shape of salary reduction or an amendment to their compensation practice. Most of those amendments that were disclosed were amendments in base salary of these CEOs.

And, you know, we've seen various ranges. We've seen, you know, 40% of these companies cutting back their CEO pay-- base salary pay, I'm sorry-- to between 10% to 25%. We've seen in the consumer and in the industrial sector, we've seen CEOs taking a larger cut in their base pay. However, when you look at the total compensation of the CEO, base salary most of the time, it's only a small percentage of that. Because the majority of their compensation really exists off short-term bonuses and long-term incentive plans.

ADAM SHAPIRO: Did you look at the study of the companies that did cut the CEO base salary? Did they also cut the regular employee salaries?

ANIEL MAHABIER: They did. They did. There's always a strong cor-- there has been a strong correlation between the impact that the pandemic had on the workforce of that company, whether it's laying off workforce, whether it's furloughing workforce, or whether it's actually making further costs adjustments from a broader perspective. We've seen that these CEOs, you know, most of the time, either voluntarily or by pressure from other stakeholders decided to sacrifice parts of their salary to align their interests with the interests of the broader workforce base.

ADAM SHAPIRO: It doesn't sound very fair, though. It sounds as if the CEOs who did this at the companies that cut pay for everybody, pulling one over on us.

ANIEL MAHABIER: I think, you know, these companies and their CEOs have been acting in the interest of all stakeholders. So the cuts that have been put forward have been discussed with multiple stakeholders before they are being put in place. So I find it difficult to say if it's fair and unfair. But it is a decision that's being put forward and has been carefully looked after by investors and the board of directors as well.

SEANA SMITH: Aneil Mahabier is CEO of CGLytics. Thanks so much for taking the time to join us today.