Investing May 6, 2026 0 Comments

How Top Companies Secretly Manipulate Executive Pay Amid Tariff Shakeups—and What It Means for Your Investments

Tariffs—you’d think they only mess with company earnings, right? Nope. They’ve been throwing a wrench into the gears of executive compensation too, turning bonus calculations into a wild game of “to adjust or not to adjust.” Compensation committees have been stuck at this confusing crossroads, trying to decide if tariff impacts deserve a pass or a spotlight in their disclosures. And just like that jam-packed image of diverging paths, companies’ choices have been all over the board—some playing it like a well-kept secret, while others lay all their cards on the table. The real kicker? With refund prospects looming from recent Supreme Court rulings, we’re left wondering—if money flows back, will payouts take a nosedive, or will committees play fair and square on both ends of the spectrum? Guess we’ll see if “you can’t only adjust upward” turns from advice into practice. Intrigued? LEARN MORE

Tariffs didn’t just hit company earnings last year. They also hit the performance metrics that determine executive bonuses. This has forced compensation committees to make uncomfortable calls about whether to ignore the impact of tariffs in setting executive compensation—and, if so, whether to disclose those calculations to investors. The answers, like tariffs themselves, have covered the map.

An analysis by Compensation Advisory Partners (CAP) offers one of the clearest looks at how companies have handled the issue. Among 22 large public companies with considerable tariff exposure, eight boards adjusted incentive plans to “neutralize” the effect of tariffs in calculating executive payouts. That isn’t terribly surprising. Compensation committees have long reserved discretion to adjust for external shocks. What stands out is how uneven the disclosure has been.

Of the 22 companies CAP reviewed, 11 (including Amazon and CVS) didn’t mention the impact of tariffs on their incentive plan metrics at all in their proxy statements. Among the remaining companies, eight acknowledged adjusting annual or long-term incentive payouts. But even within that group, transparency varied: four companies adjusted payouts without disclosing how much those decisions increased compensation.

The Gap and RTX are good examples of how companies have approached this without getting into specifics. Gap told shareholders that performance metrics were “adjusted for items that were not considered when the goal was set,” including tariffs—but didn’t quantify the impact. RTX took a similar approach, explaining that tariffs were “externally imposed, unpredictable and unrelated to operational execution,” and therefore should be neutralized for incentive plan purposes.

Investors reading those disclosures know adjustments were made. They don’t know how much those decisions affected actual payouts.

Some companies were more explicit, including Yeti. The tumbler maker disclosed that tariffs had a roughly $38 million negative impact on operating income for incentive purposes—and then showed exactly how it adjusted for that. That add-back lifted performance above a key threshold. As Fortune noted, the adjustment helped avoid a zero payout on a key metric and increased bonuses by more than 40%.

There’s another wrinkle here that hasn’t fully played out yet: refunds. The Supreme Court’s February decision striking down certain tariffs has already prompted companies to pursue recoveries. If those refunds materialize, they could reverse some of the very costs that boards adjusted out of their 2025 incentive calculations.

That raises an obvious question. If refunds boost future results, will committees make downward adjustments to keep things consistent? At least some compensation advisors think they should be. As one consultant put it, “You can’t only adjust upward.”

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