Boardrooms Built Tariff Shields Around CEO Pay While Workers Absorbed Cost

Corporate directors rewrote compensation rules in real time. RTX’s compensation committee voted in January 2025 to "neutralize" any tariff impact on bonus metrics, months before Trump’s Liberation Day tariffs took effect. Gap stripped tariff costs from two performance measures. Ross Stores deleted tariff expenses entirely from bonus and long-term incentive calculations. The moves let CEOs hit payout targets that would have been unreachable if tariff pain had stayed on the books.

The eight companies that disclosed adjustments refused to quantify the dollar benefit. Christopher Calio at RTX collected $27.7 million total, including a $5.1 million bonus that jumped 85% year-over-year. Gap’s Richard Dickson landed $17.2 million. Ross Stores CEO James Conroy took home $17.4 million. Apple took a softer approach, setting fiscal 2025 targets below prior-year results, citing trade policy; Tim Cook still maxed out his $12 million bonus even after Apple beat the lowered bar.

Compensation Advisory Partners found boards used three main tactics. First, they excluded tariff costs from the financial metrics that drive bonuses. Second, they widened performance curves so executives could miss targets and still collect. Third, they flattened payout ranges so even bottom-quartile performers got 87% of target bonuses, up from 77% the prior year. The result: median CEO pay rose 8% while median EPS actually fell 1.6%.

While boards shielded C-suites, rank-and-file employees faced layoffs, reduced hours, and wage freezes as companies absorbed tariff costs. Public shareholders took the hit too; stock buybacks slowed and dividends flattened at several of the same firms. The asymmetry undercuts the pay-for-performance principle that compensation committees claim to enforce. Proxy advisers Institutional Shareholder Services and Glass Lewis have begun flagging these adjustments as potential governance red flags for 2026 proxy season.

Expect more companies to adopt similar shields if Trump expands tariffs or if Middle East tensions trigger new duties on Asian goods. Compensation Advisory Partners predicts a surge in "macroeconomic exclusions" clauses for 2026 plans. Activist investors are already preparing campaigns at RTX and Gap, arguing the moves breach fiduciary duty. The SEC has so far stayed silent, but staff attorneys are reviewing whether current disclosure rules force companies to reveal the dollar value of tariff exclusions.