Tariffs, Trade Wars, and Total Comp: A Love Story Gone Sideways
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April 21, 2025
Written by Frank Glassner:
CEO Veritas Executive Compensation Consultants
Let’s be honest. When I first got into the business of executive compensation, I never imagined I’d spend quite so much time talking about tariffs. But here we are in 2025 and suddenly, every boardroom conversation sounds like a mashup of CNBC, C-SPAN, and Survivor: Global Trade Edition.
Yes, my dear readers, the tariff tempest is back. And if you thought it was going to blow over quietly, you’ve clearly never watched a presidential campaign, or a compensation committee, in action.
So how did we get here? Let’s start with the basics. Tariffs - those lovely little taxes we slap on imported goods to make a geopolitical point - are back on the menu. Thanks to what I’ll politely call “leadership volatility,” we now find ourselves in a global trade brawl, complete with retaliatory taxes, red-state targeting (shoutout to Canadian maple syrup justice), and enough economic uncertainty to give even the calmest CHRO a nervous twitch.
And the result? Compensation chaos.
Boards now face the impossible task of setting performance targets and incentive goals in an economic landscape where yesterday’s steel surge could be tomorrow’s soybean sanction. And don’t get me started on how these ripple effects hit everything from procurement to pricing strategy to, yes, the sacred cow of EBITDA.
Let’s unpack the three-ring circus.
1. Tariffs are a “Known Unknown”
If this sounds like Donald Rumsfeld wandered into your LTI strategy meeting, you’re not wrong. We knew tariffs were coming if Trump returned to the helm. What we don’t know is which countries are on the naughty list, how long the dance will last, or what retaliatory policies might be waiting backstage. It’s like writing a bonus plan during a weather forecast that only says, “brace yourself.”
So yes, ex-ante treatment of tariff impacts sounds elegant - until you try it. At best, it’s financial jazz. At worst, it’s a spreadsheet horror show.
2. They’re Not Just Economic—They’re Political Dynamite
Unlike interest rates or supply chain glitches, tariffs aren’t an accident of fate. They are a deliberate political choice - one that slices public opinion straight down the middle. What your shareholders applaud, your workforce may protest. And what your board decides to "adjust" could earn you a front-page seat in The New York Times under the headline “Executives Win While Workers Pay.”
3. They Don’t Hit Equally - Some Industries Get Walloped, Others Win
Steel producers might toast the news. Auto manufacturers? Not so much. Semiconductor companies, agricultural exporters, anyone with a global sourcing strategy or a Chinese supplier? Buckle up. Meanwhile, Canada is out here threatening retaliation on bourbon, blue jeans, and Harley-Davidsons because even international diplomacy appreciates poetic justice.
Oh my, What’s a Compensation Committee to Do?
The technical playbook isn’t new:
- Widen performance ranges;
- Use relative metrics (hello, TSR);
- Lock in ex ante adjustment rules; and
- Apply good old-fashioned board discretion;
But this time, the stakes are different.
Tariffs have ethical considerations and moral optics.
The same discretion used during COVID - remember “do the right and fair thing”?—now risks being seen as “protecting the privileged.” And even the most airtight formula can feel like a farce when consumer prices soar and employees face layoffs.
Widening the range might dilute incentives. Hardcoding adjustments might prove tone-deaf. And discretion? It walks a tightrope between fairness and fury - especially in the age of CD&A transparency and proxy activism.
What’s the Glassner Guidance?
Simple. Do it Veritas style - Use your tools, but don’t be naïve. Start with rigorous boardroom dialogue. Understand your specific tariff exposure. Map out mitigation strategies. Keep a real-time journal of discretion discussions (you’ll thank yourself at proxy time). And for heaven’s sake, be transparent - preferably before ISS, Glass Lewis or a monster institutional investor tells you to be.
Above all, remember: incentive plans are meant to drive performance, not protect it.
That’s a tough sell in a world where macro-policy throws curveballs faster than your CFO can update the forecast. But as with any challenge, clarity, communication, and yes – courage - will separate the fair-weather boards from the Hall of Fame performers.
And let’s not forget: if CEOs get paid to “navigate headwinds,” then let’s make sure those windmills aren’t made of straw.
Welcome to the trade war.
May your metrics be strong, your discretion be sound, and your proxy statements read like love letters to common sense.
FBG
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Frank Glassner is the CEO of Veritas Executive Compensation Consultants and a widely respected authority on executive pay and strategic compensation design. Known for his discerning judgment, consummate diplomacy, incisive insights, and unwavering discretion, he is a trusted advisor and confidant to boards, CEOs, and institutional investors worldwide.
