Hilton Hotels

Annual meeting: May 29

Total reported compensation for Hilton CEO Chris Nassetta was $55,870,639 in 2020, a 161% increase from 2019, despite the fact that the company suffered losses of $720 million and laid off many employees during the pandemic. Nassetta’s compensation is dominated by a controversial $49,518,248 stock award that led ISS to recommend against the pay package.

As noted in the proxy statement:

“By September 2020, due to these unforeseen circumstances and global economic conditions that were outside of management’s control, we did not project that any of the performance measures defined for the PSUs granted in 2018, 2019 and 2020 (the “original PSUs”) would be achieved. Therefore, the original PSUs were all projected to pay out at zero in 2021, 2022 and 2023, after the end of their respective performance periods.”

That should have been the end of the paragraph. Performance-based shareholder units are only designed to pay off when performance merits pay. Thus, it is completely acceptable that they pay out at zero because guaranteed pay comes in the form of a salary.

Instead, Hilton’s Board retroactively modified awards in December of 2020. As described by CBS News:

“The crucial change: Hilton's 2020 financial performance no longer factored into whether the hotel chain's executives would be eligible to collect tens of millions of dollars in multi-year stock awards.” The decision effects multiple tranches of awards, some of which have already vested.

The bottom line here is that while Hilton’s frontline employees struggled (median employee pay decreased by 34% from 2019 to 2020) in an industry devastated by the COVID-19 pandemic, Nassetta’s pay more than doubled to being the highest pay package of the 100 S&P 500 firms with the lowest median wages, sending the CEO pay ratio skyrocketing from 533:1 in 2019 to 1,953:1 in 2020.