Rare Stock Tweak During Pandemic Adds Millions to a C.E.O.’s Potential Payout

Raytheon’s recent adjustment, which analysts say is rare, reveals the leeway that companies have to shift the goal posts when setting compensation. More than a decade ago, the backdating of stock options at certain companies — when executives picked earlier dates for the price at which their options could be exercised, making then more valuable — created a corporate scandal and led to penalties.

Raytheon representatives say they made the adjustment for the sake of fairness. However, the timing, when a majority of the company’s work force is being called on to make sacrifices, highlights the different standards that can apply to certain employees and top executives. In addition to pay cuts of 10 percent, Raytheon is furloughing many of its 195,000 employees and cutting billions of dollars in costs, after the pandemic brought global air travel to a near standstill. Mr. Hayes has also volunteered to take a 20 percent pay cut — but to his $1.6 million salary, which is a small part of his pay package.

Companies use a variety of stock compensation as part of the pay of senior employees, and these so-called equity awards are usually worth far more than the base salary.

Mr. Hayes’s compensation at United Technologies included restricted stock units, which typically give the holder the right to get shares after certain operating and stock return targets are met, and stock appreciation rights, which are similar to stock options. If, at the time of vesting, the price of the stock is below the price at which the option or appreciation right is set, those awards are considered to be underwater.

That is not expected to happen in Raytheon’s case, because many believe the newly merged defense and aerospace giant will capitalize on its dominant position and do well as the economy recovers. Analysts forecast that earnings at Raytheon will surge 25 percent in 2021 from this year’s level and that its stock will go up 17 percent.

In fact, Raytheon’s stock price jumped 30 percent in the first few days of trading in April. Normally, a rising stock is an unalloyed benefit for executives earning share-based compensation, but because of the intricacies of the United Technologies merger, it left Mr. Hayes and others with less than they hoped to get.

As part of the merger, Raytheon had to recalculate how the United Technologies stock-related awards given to Mr. Hayes and others since 2018 would convert into stock units and appreciation rights issued by the new company. To do that, the Raytheon board initially decided it would base a stock price for the conversion on the fourth and fifth days of trading of the new company — under the assumption that any volatility associated with a new stock would settle by then.