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While Millions Lost Jobs, Some Executives Made Millions in Company Stock

Even as millions of people have lost their jobs during the pandemic, the soaring stock market since the spring has delivered outsize gains to the wealthiest Americans. And few among the superrich have done as well as corporate executives who received stock awards this year.

Executives With the Biggest Gains

Corporate leaders whose stock options or grants this year have appreciated the most.




Total value of all stock options

or grants given in 2020

Appreciation

value

Current

value

William

Lynch

0

*

$64.4

mil.

$64.4

mil.

Peloton Interactive

Edward

W. Stack

$7.0

mil.

67.4

60.4

Dick’s Sporting Goods

Frederick

W. Smith

0

*

36.9

36.9

FedEx

Stéphane

Bancel

0

*

29.9

29.9

Moderna

Marc

Benioff

13.3

40.9

27.6

Salesforce

Total value of all stock options

or grants given in 2020

Appreciation

value

Current

value

William Lynch

0

*

$64.4

mil.

$64.4

mil.

Peloton Interactive

Edward W. Stack

$7.0

mil.

67.4

60.4

Dick’s Sporting Goods

Frederick W. Smith

0

*

36.9

36.9

FedEx

Stéphane Bancel

0

*

29.9

29.9

Moderna

Marc Benioff

40.9

13.3

27.6

Salesforce


Notes: *The value is zero in these cases because the company’s stock price at the time of the grant had not risen above the stock price at which the options were granted. Current value as of Oct.7.

Source: Institutional Shareholder Services

By Karl Russell

Edward W. Stack, the chief executive of Dick’s Sporting Goods, and William Lynch, president of Peloton, for example, are each sitting on paper gains of over $60 million on stock-based awards they mostly received in the first three months of the year, based on Wednesday’s closing stock prices, according to an analysis by Institutional Shareholder Services, which advises investors on how to vote on corporate matters.

And Stéphane Bancel, the chief executive of Moderna, a drug maker developing a coronavirus vaccine, received options in January that have appreciated by nearly $30 million.

The pay gains are a result of the sharp rise in the stock prices of these companies, which investors are betting are well positioned to grow during the pandemic. Another reason these stock awards have appreciated so much is that some of the grants were made when the stock market was close to its lowest point for the year. Of course, many executives are also sitting on gains on stock they got in earlier years.

But the surge in wealth also highlights how the compensation of senior executives is designed to give them enormous windfalls, which they have gotten even during one of the sharpest economic downturns in decades.

These gains are also a reminder that income and wealth in the U.S. economy are tilted heavily toward a tiny number of top earners who own significant amounts of stock. Most Americans own little or no stock, according to a recent Federal Reserve report, and many had less in savings in 2019 than they did before the last recession a decade ago.

“The stock market is not an indicator of the health of the economy for working people; it’s an indicator of economic inequality,” said Brandon Rees, deputy director of corporations and capital markets at the A.F.L.-C.I.O. “These C.E.O. payments reflect that reality.”

For decades, corporate boards have tried to tie executive pay to the performance of the company’s stock in an effort to make managers more accountable to shareholders. Yet executives still often end up doing far better than might be justified by a company’s fundamental business performance.

Mr. Stack’s compensation shows how top executives can rack up such large gains so quickly.

In March, when the stock market was close to its low point and the share price for Dick’s Sporting Goods was also at a nadir, he received 355 percent more stock options for his 2020 award than for his 2019 grant and 142 percent more restricted shares, according to the I.S.S. analysis and the company’s securities filings. (Businesses often hand executives stock in two forms: stock options or restricted shares. An option usually provides its owner the right to acquire company stock at a future date at the price it was trading on the day it was issued. A restricted share is stock that executives cannot sell for months or years.)

When asked to explain how the company arrived at Mr. Stack’s 2020 stock grants, it said in a statement: “As in prior years, the compensation committee considered a number of factors, including the company’s 2019 performance.”

Then, everything started to move in Mr. Stack’s favor. Investors, believing that Dick’s could profit in the pandemic economy and encouraged by stimulus from Congress and the Federal Reserve, bid up the price of the company’s stock. But because Mr. Stack had far more shares in the 2020 stock grants than he did in 2019, the overall value of that awards have ballooned. The 2020 awards were worth about $7 million when they were issued and are now valued at a combined $67.4 million. By contrast, Mr. Stack’s 2019 awards are worth $15 million at Wednesday’s stock price.

Of course, the gains could shrink if Dick’s stock declines. Mr. Stack can exercise and sell all his stock options only after four years. In a filing, the company said his restricted stock awards would become available over time but did not specify the period.

Still, the award raises questions. Shareholders may object to an arrangement that could give Mr. Stack compensation far in excess of what they might have expected when the stock grant was made.

“If you don’t adjust your approach when there is a shake-up in the market and your stock price is down significantly, investors are going to raise concerns,” said Brett Miller, head of data solutions for the responsible-investment arm of I.S.S. “What you don’t do is give executives more opportunities to increase their value.”

Employees may also feel left out. As Mr. Stack’s stock grant was swelling in value, Dick’s furloughed many of its employees for several weeks. In the company’s last fiscal year, his compensation was 1,487 times the pay of the company’s median employee, a measurement that includes many part-time workers. Mr. Stack has a large stake in Dick’s and controls the company through powerful voting shares.

The I.S.S. analysis covers top executives whose pay details are included in companies’ proxies, documents that publicly traded businesses file with the Securities and Exchange Commission annually. Proxies provide investors with important financial information and instructions on how to vote on corporate proposals and board appointments.

Not all executives have gains on their 2020 grants, because many companies have struggled in the pandemic. In its survey, which covers 2020 grants made by companies in the Russell 3000 stock index, I.S.S. found that 1,675 “named executive officers,” or the executives who appear in proxies, had gains while 1,388 had losses, as of Wednesday’s closing stock prices. The average appreciation was nearly $1.5 million and the average loss $827,000.

The chief executives of technology companies, many of which have thrived during the pandemic, have done particularly well. Their average gain on 2020 grants was $3.2 million, while the average loss was $543,000.

The largest combined gain in the survey was Mr. Lynch’s $64 million on his 2020 options grants from Peloton. Its stock is up 500 percent from its 2020 low.

If a company’s stock soars like Peloton’s, employee stock awards will most likely produce immediate paper fortunes. But Mr. Miller said companies could structure stock awards to reduce that likelihood if they wanted to. For example, companies can space out grants so they are not all granted when the stock is at a low or a high point.

Peloton declined to comment.

Ray Jordan, a spokesman for Moderna, said Mr. Bancel’s options vested over several years, meaning that “paper gains in a few months do not necessarily translate to long-term gains if the stock performance is not maintained.”

Some executives at companies that have been hit hard by the pandemic have still done well. In March, William J. Hornbuckle, chief executive of MGM Resorts International, gave up the remainder of his 2020 salary in exchange for restricted stock units worth $700,000, the amount of his forgone salary. After MGM stock recovered somewhat from the lows it plumbed in March, that grant is worth $1.3 million on paper — and all his 2020 awards have appreciated by a combined $4 million.

“At a time of great uncertainty when all of our properties were closed with no clear plan for reopening, Mr. Hornbuckle and several of our executives volunteered to help the company conserve cash by exchanging all or a portion of their cash compensation for the remainder of 2020 for restricted stock units that vest at the end of the year,” Debra DeShong, an MGM representative, said in a statement. “By doing so, they took on great risk, risk that still exists in that we are not operating under normal circumstances and we are still in a period of recovery.”

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A Socially Distant Las Vegas? What Are the Odds?

For decades, the El Cortez Hotel & Casino in downtown Las Vegas has been known for single-deck blackjack.

But when the casinos and resorts open up — tentatively early June after weeks of being shut down, players will no longer be able to touch the cards. About 100 slot machines at the casino have been removed and the remaining 750 are now farther apart. Tape on the floor at the craps tables shows players where to stand to meet social-distancing requirements

“The days of 16 people standing around the dice table high-fiving one another are over for now,” said Adam Wiesberg, the general manager of the El Cortez, whose previous owners include the gangsters Bugsy Siegel and Meyer Lansky.

While many cities and states grapple with the process of reopening, the stakes are high for Las Vegas, which has been hit particularly hard. About one-third of the local economy comes from the leisure and hospitality industry, more than any other major metropolitan area of the country. And when the city opens up after weeks of being shut down because of the coronavirus pandemic, it will be a very different place.

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Credit…Roger Kisby for The New York Times

For starters, many of the flashiest hotels and casinos on the Las Vegas Strip will remain closed. The famed all-you-can-eat buffets will be gone. So will the nightclubs. It is unknown when big conventions, must-see live shows and sports events will return.

For towering giants like MGM Resorts International, Wynn Las Vegas and the Las Vegas Sands, which offer their clientele white-glove service, gambling accounts for about a third of their revenues. The remaining two-thirds comes from hotel rooms, restaurants, night clubs, spas, pool parties, shows and other entertainment.

Will the stripped-down version of the city attract the visitors who previously came to party at poolside during the day, rock out at concert venues at night and dance at nightclubs into the wee hours of the morning?

“Part of the reason these guys can charge $25 for a watered-down vodka soda is the energy and vibe around their resorts,” said Chad Beynon, an analyst at investment bank Macquarie Group. “If these clubs aren’t open and you’re not permitting the same party atmosphere, will people still come?”

Image

Credit…Roger Kisby for The New York Times
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Credit…Roger Kisby for The New York Times
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Credit…Roger Kisby for The New York Times
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Credit…Roger Kisby for The New York Times

For many, the point of Las Vegas is the antithesis of social distancing.

“Nobody comes to Vegas to spend time by themselves,” said Brian Labus, an assistant professor at the School of Public Health at the University of Nevada, Las Vegas, who is also a member of the medical advisory team for Gov. Steve Sisolak of Nevada. “It’s a place people come to be social with one another.”

Before Governor Sisolak shut down all nonessential businesses in Nevada in mid-March, Las Vegas was booming. The city had been one of the last to bounce back from the financial crisis of 2008 that sent foreclosure rates on residential properties soaring and collapsed home prices in the region.

But by earlier this year, more than three million visitors a month were flocking to the city, filling up the hotel rooms and cramming into the casinos, Cirque du Soleil performances and restaurants. For three consecutive months through February, gambling revenues in the state totaled more than $1 billion.

The city’s fortunes filled its skylines with multibillion-dollar projects aimed at attracting vast crowds of people, including the 65,000-seat Allegiant Stadium that will be the new home for the National Football League’s Raiders; the nearly 17,000-seat MSG Sphere at The Venetian; and the mega-resort project Resorts World Las Vegas. Circa Resort and Casino, a two-story casino being built downtown, features temperature-controlled rooftop pools large enough for 4,000 people to watch games and other entertainment on a giant outdoor video screen.

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Credit…Roger Kisby for The New York Times

“Things were really bullish here in Las Vegas,” said Stephen Miller, a professor of economics at the University of Nevada, Las Vegas. “And now, as a result of the virus, the public health crisis and the government shutting down the economy, it looks to me like Las Vegas is going to be once again one of the hardest-hit metro areas in the West.”

In fact, Nevada’s unemployment rate skyrocketed to 28.2 percent in April, the highest in the country and in the state’s history, as casinos and other nonessential businesses laid off or furloughed hundreds of thousands of employees.

Last week, Governor Sisolak signaled that casinos could reopen as early as June 4.

But guidelines issued this month by the Nevada Gaming Control Board limit capacity to 50 percent and require new cleaning and social-distancing policies. Casinos are now taking out slot machines — which can make up half of the gaming revenue at many establishments — and considering raising minimum bets at card tables. Regulators have capped capacity at three players a table for blackjack and four for poker.

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Credit…Roger Kisby for The New York Times

Executives at Wynn, which reported a 42 percent drop in revenue in the first quarter and saw a $105 million profit from a year ago turn into a $402 million loss, say they plan to open both Wynn and Encore properties. The stock price of Wynn Resorts is down 46 percent this year.

Executives at MGM Resorts, which runs more than a dozen casinos on the Strip, told Wall Street analysts in late April that the company would likely first open the Bellagio, home to the famous water fountain show, and New York, New York, a midrange property that features a roller coaster. MGM’s stock has dropped 53 percent this year.

All the hotels and casinos are taking safety measures. The Venetian, which is owned by Las Vegas Sands Corporation, has installed thermal cameras at entrances, put up plastic barriers at hotel check-in desks and removed about half of the chairs at its pools, rearranging the others to meet social-distancing protocols.

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Credit…Roger Kisby for The New York Times

At the El Cortez, Mr. Wiesberg said he scrambled in recent weeks to purchase face masks, gloves and gallons of hand sanitizer for the property when it reopens.

  • Frequently Asked Questions and Advice

    Updated May 26, 2020

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • How many people have lost their jobs due to coronavirus in the U.S.?

      Over 38 million people have filed for unemployment since March. One in five who were working in February reported losing a job or being furloughed in March or the beginning of April, data from a Federal Reserve survey released on May 14 showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.

    • Is ‘Covid toe’ a symptom of the disease?

      There is an uptick in people reporting symptoms of chilblains, which are painful red or purple lesions that typically appear in the winter on fingers or toes. The lesions are emerging as yet another symptom of infection with the new coronavirus. Chilblains are caused by inflammation in small blood vessels in reaction to cold or damp conditions, but they are usually common in the coldest winter months. Federal health officials do not include toe lesions in the list of coronavirus symptoms, but some dermatologists are pushing for a change, saying so-called Covid toe should be sufficient grounds for testing.

    • Should I wear a mask?

      The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.

    • How can I help?

      Charity Navigator, which evaluates charities using a numbers-based system, has a running list of nonprofits working in communities affected by the outbreak. You can give blood through the American Red Cross, and World Central Kitchen has stepped in to distribute meals in major cities.