This sound is generated automatically. Let us know if you have any feedback.
Many IPO trucking executives saw inflation outpace their total compensation packages in 2022, and some even saw significant reductions.
While Covenant Logistics’ David Parker saw his executive compensation drop 64% last year year-over-year, total pay for former Old Dominion Freight Line chief Greg Gantt rose 21% before his retirement from position, according to the securities statements.
Overall, transportation CEOs saw their total compensation package, including stock, vary significantly compared to peers from 2021 to 2022 amid high pandemic-related earnings. Analysts told Trucking Dive several factors can make or break executive earnings, such as benchmarks set by compensation committees that can include key performance metrics such as operating ratios.
Many of the changes, however, now sit alongside harsher realities of reduced wages amid a trucking recession, labor unrest and inflation.
Transportation CEO compensation goes up, down
Total pay, including stock and other incentives, has varied dramatically in recent years across the industry.
Personnel, measurements among the factors that cause changes
Some companies underwent significant changes, such as XPO spinning off a brokerage division into a new company and changing leadership from Brad Jacobs to Mario Harrick.
But for others, the changes in executive compensation show how compensation committees on the boards of different listed companies can influence decisions in the context of market conditions and an air carrier’s performance.
J. Bruce Chan, a director at investment firm Stifel, noted how companies can value key performance indicators differently, with some companies emphasizing factors such as margin performance while others focus on total shareholder return.
“Certainly Old Dominion as well as XPO — maybe to a slightly lesser extent, JB Hunt — have outperformed this year from an equity perspective,” Chan told Trucking Dive, indicating it could be a driver for 2022.
And while boards tend to keep the criteria constant, that can change from year to year, especially if a company wants to reverse the direction it’s headed.
For companies that effectively deploy capital, metrics such as the operating ratio can be correlated and help justify a CEO’s compensation package. That’s why Old Dominion’s compensation among purebred LTL companies comes as little surprise to Craig Decker, managing director at investment firm Brown Gibbons Lang & Co.
“Old Dominion has done so well in improving their operations — from their network to how they buy trucks to how they handle freight and everything else,” he said. “His margins have gotten so strong.”
New metrics affecting executive compensation
Even as the trucking industry waits for a recovery in demand, CEO compensation metrics for many companies are already set to change.
Freight broker CH Robinson Worldwide, which replaced Bob Biesterfeld with Dave Bozeman as CEO in 2023, has updated its criteria, for example, to include peer comparisons in executive compensation starting this year.
Meanwhile, Old Dominion, which hired consulting firm Pearl Meyer & Partners for new executive compensation data, amended its 2022 pay formula for changes that begin in 2023.
Among the adjustments, the company updated its performance-based restricted stock award so that executives have the option of up to 150% of their base salary starting in the first quarter of 2024, up from 100%.
“Consistent with the pay-for-performance philosophy, the modified program allows for additional award funding for superior performance results.” the company said.
Publicly traded trucking companies are expected to release a snapshot of their executive compensation data for 2023 in March or April of next year as part of their annual proxy statements filed with the Securities and Exchange Commission.