Hollywood's Top CEOs See Compensation Fall 5 Percent in 2012
With corporate boards and investors more cautious over executive compensation, the CEOs of many entertainment conglomerates saw declines in the value of their pay packages for the latest year. The drops, which are in contrast to executive compensation in the broader economy, come despite continued improvements in earnings and stock performance among media conglomerates.
According to data compiled by the AFL-CIO, when Apple CEO Tim Cook is stripped from the equation (because he earned $378 million in 2011 but just $4.2 million in 2012), CEO pay at S&P 500 companies rose 5 percent last year. But among the seven media conglomerates (substituting Discovery for Sony, which hasn't yet reported) CEO pay has dropped 5 percent.
The falling compensation among media executives doesn’t surprise some observers, who expect that other industries might follow suit soon enough.
“Boards are becoming more vigilant with pay and trying to do a better job of benchmarking executive pay to relative performance -- not just an increase in performance but increase beyond a benchmark or the market overall," said David Becher, associate professor of finance at Drexel University. "Whether this will translate into lower pay overall, I think is too early to say."
But it means that while earnings and stock prices can be up, companies may not fully hit all targets set by boards as a pay benchmark. Thus, bonuses and stock options granted can be lower than in past years, Becher explained.
That’s the case with Viacom CEO Phillipe Dauman, who earned roughly the same base pay and stock and option compensation in 2012 as in 2011, though overall he made 22 percent less in 2012 largely because a non-equity incentive bonus that was $20 million in 2011 dropped to $11.5 million in 2012. According to a filing, the discrepancy was due to Viacom hitting just 87 percent of the targets of operating income, free cash flow and “qualitative objectives” that it had set out for Dauman, while the year prior the company hit 137 percent of those targets. Viacom's earnings for the fiscal year declined 7 percent but the stock climbed 41 percent, and Dauman was paid $33.5 million.
CBS president and CEO Leslie Moonves was the best-paid industry executive among the major companies in 2012, as was the case the year prior. Also like a year earlier, he was followed in 2012 by Discovery Communications president and CEO David Zaslav.
Moonves' compensation declined 11 percent from $69.9 million in 2011 to $62.2 million and came in ahead of the $57.7 million he had made in 2010. The key driver of the decline in 2012 was several millions of dollars in options he received the year before for a one-time signing bonus. But while Moonves’ compensation shrank, CBS stock rose 42 percent in 2012 and earnings were up 21 percent.
Zaslav made $49.9 million in 2012, slightly below the $52.4 million that he had earned in 2011 amid changes in the value of his stock options, even as the company’s shares rose 55 percent. Discovery’s earnings, though, sunk 17 percent.
Complaints of excessive CEO pay could come up again during annual shareholder meetings in the coming months, but observers don't expect serious challenges. Still, companies have started to offer non-binding say-on-pay votes amid criticism that chief executives make too much. In the media and entertainment world, criticism has focused primarily on companies controlled by the families of founders, such as News Corp’s. Rupert Murdoch and Viacom's and CBS' Sumner Redstone.
Most companies have proposed that the advisory votes on executive pay be held every few years, with Viacom shareholders among those that have voted in favor of such a measure. Nevertheless, proxy advisory firm ISS earlier this year criticized Viacom for some of its compensation practices ahead of its annual meeting and is expected to take others to task as well.
"The continuation of a multitude of poor compensation practices, such as guaranteed targets, goal retesting and the use of similar metrics for annual and long-term awards remains concerning," ISS said in its report on Viacom. "Additionally, although recent pay levels have moderated somewhat, they still appear unreasonable even in light of the company's superior performance."