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Rare Stock Tweak During Pandemic Adds Millions to a C.E.O.’s Potential Payout Rare Stock Tweak During Pandemic Adds Millions to a C.E.O.’s Potential Payout
(about 13 hours later)
Raytheon Technologies, one of the country’s biggest defense contractors, recently cut salaries for thousands of employees as the pandemic crimped business. Around the same time, it also quietly made a change to the pay package of its chief executive, Gregory J. Hayes, that could increase his future income by millions of dollars.Raytheon Technologies, one of the country’s biggest defense contractors, recently cut salaries for thousands of employees as the pandemic crimped business. Around the same time, it also quietly made a change to the pay package of its chief executive, Gregory J. Hayes, that could increase his future income by millions of dollars.
Last Friday, after the market closed, Raytheon disclosed in a filing that it had tweaked how it calculates certain stock-related payouts owed to senior executives and employees. The filing did not state by how much Mr. Hayes or others stood to benefit.Last Friday, after the market closed, Raytheon disclosed in a filing that it had tweaked how it calculates certain stock-related payouts owed to senior executives and employees. The filing did not state by how much Mr. Hayes or others stood to benefit.
The change led to an estimated $12.5 million gain for Mr. Hayes on his recent equity awards, Raytheon later told The New York Times. The company said the change was necessary to ensure that Mr. Hayes and 3,900 employees — about 2 percent of its work force — did not lose compensation they had already been awarded.The change led to an estimated $12.5 million gain for Mr. Hayes on his recent equity awards, Raytheon later told The New York Times. The company said the change was necessary to ensure that Mr. Hayes and 3,900 employees — about 2 percent of its work force — did not lose compensation they had already been awarded.
But some analysts said the change undermined Raytheon’s commitment to use pay to keep executives’ interests in line with those of shareholders. Publicly traded companies have come under pressure to structure stock-related compensation in a way that creates incentives for executives to improve long-term performance and not just seek to enrich themselves in the short term.But some analysts said the change undermined Raytheon’s commitment to use pay to keep executives’ interests in line with those of shareholders. Publicly traded companies have come under pressure to structure stock-related compensation in a way that creates incentives for executives to improve long-term performance and not just seek to enrich themselves in the short term.
At Raytheon, “short-term volatility seems to be driving the decision making around these long-term compensation objectives,” said Brett Miller, head of data solutions for the responsible-investment arm of Institutional Shareholder Services, a shareholder advisory firm.At Raytheon, “short-term volatility seems to be driving the decision making around these long-term compensation objectives,” said Brett Miller, head of data solutions for the responsible-investment arm of Institutional Shareholder Services, a shareholder advisory firm.
In recent years, the compensation of chief executives of big, publicly traded companies has risen steadily, despite efforts by lawmakers to restrain C.E.O. pay. The median boss received compensation of $18.6 million in 2018, an increase of 6.3 percent from the previous year, according to a study conducted by Equilar for The Times last year. Ordinary wages of company employees rose far less.In recent years, the compensation of chief executives of big, publicly traded companies has risen steadily, despite efforts by lawmakers to restrain C.E.O. pay. The median boss received compensation of $18.6 million in 2018, an increase of 6.3 percent from the previous year, according to a study conducted by Equilar for The Times last year. Ordinary wages of company employees rose far less.
The stock-related awards that Raytheon amended were part of Mr. Hayes’s compensation when he was chief executive of United Technologies. In late 2018, United Technologies said it would spin off two units — Carrier, a heating and cooling equipment business, and Otis, which makes elevators — and last year it agreed to merge its remaining aerospace business with Raytheon, which helps make F-35 fighter jets. Mr. Hayes took over as the chief executive of the combined company, which started trading in April as Raytheon Technologies.The stock-related awards that Raytheon amended were part of Mr. Hayes’s compensation when he was chief executive of United Technologies. In late 2018, United Technologies said it would spin off two units — Carrier, a heating and cooling equipment business, and Otis, which makes elevators — and last year it agreed to merge its remaining aerospace business with Raytheon, which helps make F-35 fighter jets. Mr. Hayes took over as the chief executive of the combined company, which started trading in April as Raytheon Technologies.
At United Technologies, Mr. Hayes’s total compensation was valued at $21.5 million in 2019, which was 282 times the pay of the company’s global median employee, who made $76,427, according to a federal filing. That rate was up from 257 times in 2018.At United Technologies, Mr. Hayes’s total compensation was valued at $21.5 million in 2019, which was 282 times the pay of the company’s global median employee, who made $76,427, according to a federal filing. That rate was up from 257 times in 2018.
Raytheon’s recent adjustment, which analysts say is rare, reveals the leeway that companies have to shift the goal posts when setting compensation. More than a decade ago, the backdating of stock options at certain companies — when executives picked earlier dates for the price at which their options could be exercised, making then more valuable — created a corporate scandal and led to penalties.Raytheon’s recent adjustment, which analysts say is rare, reveals the leeway that companies have to shift the goal posts when setting compensation. More than a decade ago, the backdating of stock options at certain companies — when executives picked earlier dates for the price at which their options could be exercised, making then more valuable — created a corporate scandal and led to penalties.
Raytheon representatives say they made the adjustment for the sake of fairness. However, the timing, when a majority of the company’s work force is being called on to make sacrifices, highlights the different standards that can apply to certain employees and top executives. In addition to pay cuts of 10 percent, Raytheon is furloughing many of its 195,000 employees and cutting billions of dollars in costs, after the pandemic brought global air travel to a near standstill. Mr. Hayes has also volunteered to take a 20 percent pay cut — but to his $1.6 million salary, which is a small part of his pay package.Raytheon representatives say they made the adjustment for the sake of fairness. However, the timing, when a majority of the company’s work force is being called on to make sacrifices, highlights the different standards that can apply to certain employees and top executives. In addition to pay cuts of 10 percent, Raytheon is furloughing many of its 195,000 employees and cutting billions of dollars in costs, after the pandemic brought global air travel to a near standstill. Mr. Hayes has also volunteered to take a 20 percent pay cut — but to his $1.6 million salary, which is a small part of his pay package.
Companies use a variety of stock compensation as part of the pay of senior employees, and these so-called equity awards are usually worth far more than the base salary.Companies use a variety of stock compensation as part of the pay of senior employees, and these so-called equity awards are usually worth far more than the base salary.
Mr. Hayes’s compensation at United Technologies included performance and restricted stock units, which typically give the holder the right to get shares after certain operating and stock return targets are met, and stock appreciation rights, which are similar to stock options. If, at the time of vesting, the price of the stock is below the price at which the option or appreciation right is set, those awards are considered to be underwater.Mr. Hayes’s compensation at United Technologies included performance and restricted stock units, which typically give the holder the right to get shares after certain operating and stock return targets are met, and stock appreciation rights, which are similar to stock options. If, at the time of vesting, the price of the stock is below the price at which the option or appreciation right is set, those awards are considered to be underwater.
That is not expected to happen in Raytheon’s case, because many believe the newly merged defense and aerospace giant will capitalize on its dominant position and do well as the economy recovers. Analysts forecast that earnings at Raytheon will surge 25 percent in 2021 from this year’s level and that its stock will go up 17 percent.That is not expected to happen in Raytheon’s case, because many believe the newly merged defense and aerospace giant will capitalize on its dominant position and do well as the economy recovers. Analysts forecast that earnings at Raytheon will surge 25 percent in 2021 from this year’s level and that its stock will go up 17 percent.
In fact, Raytheon’s stock price jumped 30 percent in the first few days of trading in April. Normally, a rising stock is an unalloyed benefit for executives earning share-based compensation, but because of the intricacies of the United Technologies merger, it left Mr. Hayes and others with less than they hoped to get.In fact, Raytheon’s stock price jumped 30 percent in the first few days of trading in April. Normally, a rising stock is an unalloyed benefit for executives earning share-based compensation, but because of the intricacies of the United Technologies merger, it left Mr. Hayes and others with less than they hoped to get.
Updated June 16, 2020Updated June 16, 2020
The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.
The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
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.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.
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.)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.)
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
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.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.
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.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.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
As part of the merger, Raytheon had to recalculate how the United Technologies stock-related awards given to Mr. Hayes and others since 2018 would convert into stock units and appreciation rights issued by the new company. To do that, the United Technologies board initially decided it would base a stock price for the conversion on the fourth and fifth days of trading of the new company — under the assumption that any volatility associated with a new stock would settle by then.As part of the merger, Raytheon had to recalculate how the United Technologies stock-related awards given to Mr. Hayes and others since 2018 would convert into stock units and appreciation rights issued by the new company. To do that, the United Technologies board initially decided it would base a stock price for the conversion on the fourth and fifth days of trading of the new company — under the assumption that any volatility associated with a new stock would settle by then.
However, the stock’s value jumped from $51 to $64 between the first and fifth days of trading, creating an odd situation. Because the number of stock units and rights to be given out was determined by dividing the last United Technologies stock price by the preselected Raytheon stock price, the jump left recipients with fewer shares than they would have gotten had the company picked the lower price.However, the stock’s value jumped from $51 to $64 between the first and fifth days of trading, creating an odd situation. Because the number of stock units and rights to be given out was determined by dividing the last United Technologies stock price by the preselected Raytheon stock price, the jump left recipients with fewer shares than they would have gotten had the company picked the lower price.
To remedy that, Raytheon instead switched to the lower $51 price at which the stock started trading, the company said last week. The upshot was that Mr. Hayes and the other employees received additional shares and appreciation rights. When that happens, the holdings of existing shareholders of the company are diluted, which critics say can have the appearance of favoring a small subset of shareholders at the expense of the larger group.To remedy that, Raytheon instead switched to the lower $51 price at which the stock started trading, the company said last week. The upshot was that Mr. Hayes and the other employees received additional shares and appreciation rights. When that happens, the holdings of existing shareholders of the company are diluted, which critics say can have the appearance of favoring a small subset of shareholders at the expense of the larger group.
Because of the change, Mr. Hayes’s unvested appreciation rights rose in value to an estimated $23.8 million from $15.5 million, according to Raytheon. His unvested stock awards jumped to an estimated value of $20.9 million from $16.7 million. Taken together, the value of his estimated payouts rose $12.5 million.Because of the change, Mr. Hayes’s unvested appreciation rights rose in value to an estimated $23.8 million from $15.5 million, according to Raytheon. His unvested stock awards jumped to an estimated value of $20.9 million from $16.7 million. Taken together, the value of his estimated payouts rose $12.5 million.
Raytheon said many other employees had benefited from the change, bolstering their combined stock-based compensation by just over $200 million. It said it had made the amendment to reduce some of the losses that employees might otherwise have suffered as a result of the way the post-merger stock conversion worked.Raytheon said many other employees had benefited from the change, bolstering their combined stock-based compensation by just over $200 million. It said it had made the amendment to reduce some of the losses that employees might otherwise have suffered as a result of the way the post-merger stock conversion worked.
“This decision, applied in the same manner across the equity awards of almost 4,000 legacy United Technologies employees, was made to reduce some of the losses that would have otherwise been suffered by dedicated employees whose hard-earned equity is being converted from United Technologies to Raytheon Technologies,” a representative for Raytheon said in a written statement.“This decision, applied in the same manner across the equity awards of almost 4,000 legacy United Technologies employees, was made to reduce some of the losses that would have otherwise been suffered by dedicated employees whose hard-earned equity is being converted from United Technologies to Raytheon Technologies,” a representative for Raytheon said in a written statement.
But Carrier and Otis, the two spun-off subsidiaries, decided not to make the change that Raytheon did.But Carrier and Otis, the two spun-off subsidiaries, decided not to make the change that Raytheon did.