Many publicly traded trucking CEOs saw inflation outpace their overall compensation packages in 2022, and some even saw major drops.
While Covenant Logistics’ David Parker saw his executive compensation drop 64% last year YoY, overall pay for former Old Dominion Freight Line head Greg Gantt increased 21% before his retirement from the post, according to securities filings.
Overall, transportation CEOs saw their total compensation package, including stock, vary significantly compared to peers from 2021 to 2022 amid pandemic-related highs in earnings. Analysts told Trucking Dive several factors can make or break executives’ earnings, such as benchmarks set by compensation committees that can include key performance metrics like operating ratios.
Many of the changes, though, now sit alongside harsher realities of reduced earnings amid a trucking downturn, labor unrest and inflation.
Transport CEO compensation increases, decreases
Personnel, metrics among factors driving changes
Some companies underwent significant change, such as XPO breaking off a brokerage division into a new company and changing leadership from Brad Jacobs to Mario Harik.
But for others, the changes in executive compensation show how compensation committees across different publicly traded companies’ boards of directors can influence decisions in the backdrop of market conditions and a carrier’s performance.
J. Bruce Chan, a director at investment firm Stifel, noted how companies can value key performance indicators differently, with some firms 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, J.B. Hunt — has outperformed this year from a stock perspective,” Chan told Trucking Dive, suggesting that might be a driving factor for 2022.
And while boards tend to keep criteria constant, that can change year to year, especially if a company wants to upend the direction it’s heading.
For companies that effectively deploy capital, measures in metrics such as operating ratio can correlate to and help justify a CEO’s compensation package. That’s why Old Dominion’s compensation among pure-play LTL companies comes as little surprise to Craig Decker, a managing director at the investment firm Brown Gibbons Lang & Co.
“Old Dominion has done so well at honing its operations — from its network to how it buys trucks to how it handles freight and everything else,” he said. “Its margins have gotten so strong.”
New metrics influencing executive compensation
Even as the trucking industry waits for demand to rebound, metrics for CEO compensation for multiple companies are already slated to change.
Freight broker C.H. Robinson Worldwide, which replaced Bob Biesterfeld with Dave Bozeman as CEO in 2023, updated its criteria, for example, to include peer group comparisons in executive level compensations starting this year.
Meanwhile, Old Dominion, which hired consulting firm Pearl Meyer & Partners for input once again on executive compensation, tweaked its pay formula in 2022 for changes that start in 2023.
Among the adjustments, the company updated its performance-based restricted stock award, so executives will have the potential to reach up to 150% of their base salary starting in Q1 2024, up from 100%.
“Consistent with our pay-for-performance philosophy, the modified program allows for additional award funding for superior performance results,” the company said.
Publicly traded trucking firms are expected to release a snapshot of their executive compensation figures for 2023 in March or April of next year, as part of annual proxy statements filed with the Securities and Exchange Commission.
