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At New England’s biggest companies, CEO paychecks surged in 2020 as revenues fell

“The acid test of any executive compensation arrangement,” said Bob Pozen, a senior lecturer at the MIT Sloan School of Management who also advocates on behalf of shareholders, is “when things aren’t going well, are [boards] able to dock CEO pay?”Brian Feulner for the Boston Globe/file

Not even a pandemic could put a crimp in what has become an inglorious hallmark of American capitalism.

Consider this: In a year when millions of low-wage workers lost their jobs and the economy ground to a halt during the pandemic, the median CEO pay at the largest public companies in New England surged 21.4 percent, to $14.5 million. While some companies saw business take off , as a whole, revenue among these New England companies fell a median 2.3 percent, according to an analysis by Equilar, an executive compensation data firm.

So much for pay-for-performance.

Executive pay these days is inextricably linked to a company’s stock performance. So in a period where the overall market is booming, as it did after the initial plunge from the pandemic last year, these pay packages can swell to outsize proportions. Of course, while much of the stock awards CEOs receive are credited to their current compensation, many don’t receive that money unless the company and its stock hit performance targets over subsequent years.

The enormity of these CEO paydays — against the backdrop of a pandemic that has exacerbated income inequality — is providing new ammunition to shareholders and policymakers to rein in the rich.


Perhaps the poster child of doing well in bad times is General Electric chief executive Larry Culp. GE’s board had reworked long-term stock awards that were previously pledged to him that made his total compensation worth as much as $73 million — contingent on Culp pulling off a turnaround of the troubled industrial giant. That made Culp one of the most highly-paid CEOs in the country, at a time when the pandemic crippled air traffic, resulting in GE revenues dropping 16 percent for the year and the laying off of thousands of workers at its aviation business.


“The acid test of any executive compensation arrangement,” said Bob Pozen, a senior lecturer at the MIT Sloan School of Management and former president of Fidelity Investments, is “when things aren’t going well, are [boards] able to dock CEO pay?”

Still, 2020 was such an unusual year it can be hard to draw broad conclusions. A number of New England companies had relatively modest declines in revenue given the massive, abrupt dislocation in the economy brought on by the pandemic. Some companies thrived during this period. Wayfair, the Boston home-furnishing online retailer, had a 55 percent increase in revenue, yet its CEO, Niraj Shah, continues to take a nominal salary.

Lynn factory workers traveled to GE’s headquarters in Fort Point last week to protest CEO Larry Culp’s pay package.Jonathan Wiggs/Globe Staff

There were also outliers and unusual circumstances: DraftKings, the Boston online sports betting giant, went public last year, and the compensation package of Jason Robins, CEO and cofounder, was valued at $236.8 million, almost entirely tied to stock awards as part of a long-term incentive plan.

And then there were those companies that had tremendous performances and their CEOs rewarded accordingly. Moderna is the most obvious of these; its revenues increased by more than 1,200 percent with government funding of its vaccine program. And CEO Stephane Bancel’s compensation rose 43.7 percent to $12.8 million as the Cambridge company completed the remarkable achievement of producing a coronavirus vaccine in less than a year.

A few did not see their pay packages increase. The compensation for TJX chief executive Ernie Herrman was $14.5 million, a decrease of about 23 percent from the previous year — in lock step with how much company revenue dropped. Herrman and other senior managers took a pay cut in 2020 after the pandemic forced the parent of T.J. Maxx, Marshalls, and HomeGoods to temporarily shutter stores and furlough the majority of its 270,000 employees.


Outside the public realm, chief executives of the state’s two largest mutually-held companies both saw their compensation decline — close to 8 percent for Liberty Mutual CEO David Long, who earned $17.8 million, and about 11 percent for MassMutual CEO Roger Crandall, who made $16.1 million.

This year the fight against massive executive pay got a big boost with President Biden firing a shot during his recent address to Congress when he decried the yawning pay gap between CEOs and workers.

Some investors are also losing patience with big CEO paydays. The season of annual meetings is just getting underway, yet already shareholders at six major companies voted to disapprove of the compensation packages of their CEOs, in so-called Say on Pay resolutions, including GE, AT&T, International Business Machines, and Starbucks, according to ISS Corporate Solutions, a consulting arm of the shareholder advisory firm.

These votes, mandated under the Dodd-Frank Act, are non-binding, but they send a strong message to boards that investors aren’t happy. Rosanna Landis Weaver, an analyst who specializes in CEO compensation for shareholder advocacy group As You Sow, expects a larger number of these pay packages to be rejected by shareholders this year than in 2020.


“The pandemic shone a huge spotlight on all kinds of different levels of inequality. It made us look at society differently,” said Landis Weaver. “It is not good for anybody. You don’t want to be a wealthy person living in a third world country.”

The role of stock awards in CEO compensation, to some critics, not only skews the size of pay packages, but can also be an incentive for the boss to pursue short-term gains or cost-cutting that ultimately hurts workers, by suppressing wages or offshoring jobs.

COVID-19 also laid bare how much credit the corner office should get for a stock turnaround. After plunging in the early days of the pandemic in 2020, the stock market roared back; arguably some of that bull market can be attributed to the Federal Reserve cutting interest rates to near zero and Congress passing an unprecedented trio of relief packages totaling $5 trillion. The rapid development of vaccines also gave Wall Street some comfort that much of the economy could return to normal.

“People are starting to question how much influence does the CEO have over stock price,” added Landis Weaver.

Boards have long argued they need to pay their chief executives handsomely to recruit and retain top talent, or at the very least be in line with industry peers. Some say that has created a Lake Wobegon effect, where no company wants to be seen as below average. But compensation packages have ballooned to the point where all that money is creating a dynasty of profound wealth.


This is not normal. The grotesque compensation package has become a unique feature of American capitalism. According to a 2017 Bloomberg Global CEO Pay Index, CEOs of the biggest public US companies averaged $14.3 million in annual pay— in some cases nearly twice what their counterparts in the United Kingdom, Germany, and Hong Kong make.

Perhaps it would be OK if the average American worker shared in the largesse, but they have been left behind. An analysis done by the Economic Policy Institute found the ratio of compensation between CEOs and their workers was 21-to-1 in 1965; by 2019, the ratio was 320 to 1.

To rein this in, the Biden administration wants to increase the corporate income tax, nearly double the capital gains tax rate for incomes over $1 million, and end popular loopholes on inheritances and carried-interest that lower the tax bills of private equity managers.

While populist sentiment for an equitable economy is strong, advocates know change won’t happen overnight. And there are lessons to be learned from previous efforts that led to unintended consequences. In 1993, Congress prevented corporations from deducting the salary portion of executive pay above $1 million. That encouraged corporate boards to load up the stock awards side of the pay packages, over time resulting in lopsided compensation where salary is now only a fraction of the overall package.

“We’re talking about turning around an ocean liner,” said Brandon Rees, deputy director of corporations and capital markets at the AFL-CIO. “We have a long road ahead to heal our economy. We’re optimistic that Biden’s economic plan will get that done.”

Regulatory fixes are top of mind for Pozen, the MIT Sloan lecturer who has been working with the Council of Institutional Investors and pushing for more transparency in executive pay. In 2019, the council petitioned the Securities and Exchange Commission to ensure that public companies explain how they use non-standard metrics to determine CEO pay.

Pozen also thinks Congress should put more teeth into “Say on Pay” votes: If shareholders reject the compensation packages in two consecutive votes, then the second one become binding.

“We have a lot of instances companies have not done really well, and CEO pay has been quite high,” said Pozen. “There are always explanations. I’m not persuaded.”

Then there’s the Tax Excessive CEO Pay Act, first introduced in 2019 by Vermont Senator Bernie Sanders, and again in March with a long list of cosponsors that include Massachusetts Senators Ed Markey and Elizabeth Warren, and US Representatives Stephen Lynch, Jim McGovern, and Ayanna Pressley.

Similar bills have been introduced in the Massachusetts Legislature — one by state Senator Jason Lewis and another by State Representative Erika Uyterhoeven.

Sanders’s proposal would raise taxes on public and private companies that have at least $100 million in annual gross receipts, and whose CEOs make at least 50 times more than the median pay of their workers.

Had the bill been in effect in 2019, according to analysis from Sanders’s office, Walmart would have paid up to $855 million more in taxes. CEO Doug McMillon’s total pay was $22 million, 983 times the median pay of a Walmart worker of $22,484 that year, according to the AFL-CIO.

Sarah Anderson, global economy project director at the Institute for Policy Studies, likens the bill to levying hefty taxes on cigarettes; the strategy didn’t completely eliminate smoking but reduced the prevalence while raising money for public health. The same could happen by taxing excessive executive pay and using the proceeds to close the wealth gap.

“It would give a strong incentive for companies to change their behavior that would be good for everyone,” added Anderson.

On the list of largest New England companies analyzed by Equilar, only two — HubSpot and Wayfair — have low enough CEO-to-employee pay ratio to avoid additional taxes if Sanders’s bill were the law.

A ratio surtax is already in effect in Portland, Ore., and voters in San Francisco approved a similar tax in 2020. Proponents believe the policy encourages companies not only to reexamine executive compensation but also whether workers are being paid fairly.

Retailers often have the biggest pay gap because low-wage and part-time workers tend to make up much of the workforce. In 2020, TJX, the Framingham retailer, had a CEO-to-employee pay ratio of 1,108 to 1, with median worker pay of $13,135, according to its securities filing.

Uyterhoeven, the Somerville Democrat who wants Massachusetts to adopt an excessive CEO pay tax, said the ratio gets people to focus on how the status quo can’t endure.

“Inequality is hard to grasp,” she said. “Your CEO is making 1,000 times more than the median employee. That means you need to work a millennia to earn what a CEO made this year.”

Shirley Leung is a Business columnist. She can be reached at