Celanese
Annual Meeting April 15
The $7,067,446 of total compensation in 2020 for Celanese CEO Lori J. Ryerkerk includes a bonus of $1,385,000 that was calculated under new metrics after it became apparent that goals set last year would not be met.
In February 2020, Celanese defined “threshold,” “target,” and “superior” goals for the adjusted EBIT performance metric, which was weighted at 65% in the formula used to calculate the annual incentive payment. The Compensation Management & Development Committee (CMDC) concluded that these “no longer represented realistically achievable targets due to the disruption caused by the pandemic and resulting decline in demand for our products especially during the early stages of the pandemic.”
In the summer of 2020, the CMDC created new metrics and objectives, stating that they “were not intended to be applied in a formulaic manner to calculate the annual incentive payment, but rather to focus management and bonus-eligible employees on key priorities to improve the position of the business in 2020 and beyond with the understanding that the CMDC would consider performance against these metrics and objectives when determining an appropriate level of payout for the annual bonus plan.”
2020 was undoubtedly challenging for everyone. However, most companies appear to have accepted the reality that bonuses are not paid every year. For example, Dow Chemical “considered the pandemic’s significant impact to the Company’s earnings which resulted in below threshold Operating EBIT.” However, Dow concluded that the “Committee determined that a discretionary adjustment due to COVID-19 impact was not warranted.”
While Celanese provides laudable disclosure on its original and modified goals, it remains questionable as to whether the changes were warranted or necessary in the first place. Los Angeles County Employees Retirement Association (LACERA) raised this issue in the spring of 2019, before the company decided that the original goals were unreachable. In a memo to the Trustees, Jonathan Grabel, Chief Investment Officer at LACERA, states: “We are carefully watching compensation committee decisions in the wake of the downturn.” Moving goalposts is of particular concern in determining executive compensation. As LACERA notes, “Such provisions undermine the philosophy of ‘at-risk’ executive pay and are instead a ‘heads we win, tails you lose’ proposition for investors.”