Over the past few months, a number of prominent California-based firms have made major overhauls to their executive compensation systems, mirroring larger trends in corporate governance and economic realities.

Meta Platforms Inc.

Meta, the parent entity of Facebook, WhatsApp, and Instagram, has come under fire after announcing massive executive bonus hikes just weeks after firing thousands of workers. As reported by a filing to the Securities and Exchange Commission, Meta boosted the “target bonus” of its named executive officers from 75% to 200% so their cash payments could compete with those at industry leaders Google and Apple. This effort comes in the midst of big bets on artificial intelligence and a strategy to trim expenses. It has raised ire and talk about inequality in earnings amid sweeping job cuts, however.

Sutro Biopharma

South San Francisco biotech company Sutro Biopharma has made dramatic changes because of financial struggles. The firm posted job cuts for almost half its employees and also the shuttering of its San Carlos production center. At the same time, CEO William Newell, Chief Financial Officer Edward Albini, and Chief Medical Officer Dr. Anne Borgman are all resigning, receiving substantial separation pay of about $600,000. These steps are designed to lengthen the financial runway of the company and move attention to early-stage research programs, which is the mercurial nature of the biotech sector.

Tesla Inc.

Tesla board chair Robyn Denholm, who was appointed by Elon Musk, has received about $682 million in cash and stock since 2014, the most paid by any public U.S. company’s board chair.

This remuneration, combined with her sanction of Musk’s possible $56 billion payday, has incited backlash and concern over her capacity to effectively oversee Musk. Although Tesla sales and share prices have slumped, Denholm has diversified wealth, placing funds in Australian start-ups, basketball clubs, and other activities. Her extensive outside interests and compensation cast doubts regarding the independence and effectiveness of her role at Tesla.

Wider Trends in Executive Compensation

These trends in California are indicative of broader trends in executive compensation:

• Performance-Based Pay:

There’s increasing momentum towards linking executive compensation to company performance metrics, aligning management incentives with shareholder interests.

• ESG Metrics Included:

Businesses are increasingly integrating Environmental, Social, and Governance (ESG) objectives into executive compensation plans, demonstrating a focus on corporate responsibility.

• Long-Term Incentives:

There is increased focus on long-term incentives, like stock options and performance shares, to make sure executives are committed to the company’s long-term success.

• Market Volatility:

Financial uncertainties and market volatility have prompted firms to realign executive compensation frameworks to ensure financial stability as well as stakeholder confidence.

In summary, the California landscape of executive pay is changing rapidly, driven both by internal company initiatives and macroeconomic forces. Firms are more and more striking a balance between the demand to attract and retain high-skilled talent and the need to tie compensation to performance, to stakeholders’ needs, and to society at large.