Salary Cuts for Tech CEOs Are Not Always a Sacrifice

Salary typically only accounts for a small fraction of the total remuneration received by industry executives.

‍

Twilio Inc. stated that its employees would be reduced by 17% and that Chief Executive Officer Jeff Lawson's basic pay would be cut in half to $65,535. The previous week, Zoom Video Communications Inc.'s millionaire founder Eric Yuan said that he would lower his pay and forgo a bonus after the company laid off 1,300 employees.

‍

Following a year in which the tech-heavy Nasdaq 100 Index fell 33%, businesses are more eager than ever to demonstrate to investors that they are listening to requests for significant expense cuts to enhance margins, including cutting CEO compensation. However, the majority of CEOs' overall remuneration, which is largely favored by stock awards and options, only comprises a small part of their income.

‍

According to the company's annual report, Lawson's base pay, for instance, represented less than 1% of his $14.6 million total 2021 compensation package.

‍

According to Zoom's proxy filing, Yuan's remuneration of $301,731 was nearly a quarter of his total income for fiscal 2022. Nevertheless, he holds direct and indirect control over more than 13% of the company's shares through businesses connected to his family, which has allowed him to amass a fortune valued at $5 billion by the Bloomberg Billionaires Index.

‍

In a blog post on February 7, Yuan stated, "As the CEO and founder of Zoom, I am liable for these missteps and the actions we take today. And I want to demonstrate my accountability via both my words and deeds.

‍

Even more, seasoned organizations' executives are having their salaries reduced. CEO Sanjay Mehrotra will get a pay cut of a fifth at Micron Technology Inc., which is cutting workers by 10%, and disclosed the news in a regulatory filing in February. In fiscal 2022, Mehrotra had a base income of $1.41 million, while stock awards made up the majority of his total remuneration of $28.8 million.

‍

Undoubtedly, some of the cuts affect more than just pay. In 2023, Apple Inc. expects to cut CEO Tim Cook's pay by more than 40% to $49 million, citing investor advice and Cook's own request for a pay cut. Although there haven't been any significant layoffs disclosed by the firm, Institutional Shareholder Services and other shareholder advisory organizations have previously criticized it for Cook's prior remuneration package.

‍

Apple Pay Cut

Tim Cook, the CEO, will receive a 40% pay cut in 2023.

‍

Even yet, the decrease in his award might not last for long. His yearly target salary will be modified by the company's compensation committee to fall between the 80th and 90th percentiles in comparison to its peer group. In the upcoming weeks, companies will continue to disclose pay packages for 2022 as part of their proxy statements, providing more information on CEO pay decreases or increases. According to James Reda, national managing director at Gallagher and a consultant to businesses on executive remuneration, "I think you're going to see flat CEO pay for the first time in a long time."