Disney Reworks CEO Bob Iger's Bonus Compensation

Bob Iger - Solo: A Star Wars Story Premiere- Getty-H 2018
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The company said it will "establish more rigorous performance requirements for his equity award than those reflected in the original contract."

When Bob Iger's contract expires at the end of 2021, he could be in line for a much larger, or smaller, bonus as he steps down as CEO of Disney, courtesy of an amendment to his contract outlined Monday in an SEC filing.

Disney said the amendment's purpose is to "establish more rigorous performance requirements for his equity award than those reflected in the original contract."

The change has nothing to do with Iger's annual compensation as it only affects the potentially huge bonus he gets after his contract expires and he presumably retires.

It's a complicated calculation that is impossible to calculate entirely accurately, given there's no way to know what Disney's stock will trade at come the end of 2021, or where the rest of S&P 500 will be trading, and the formula is based on both metrics.

But if based on Monday's stock price and assuming Disney shares outperformed 75 percent of the other stocks making up the S&P 500, he'd get a bonus of about $135 million, whereas without the amendment he'd get roughly $119 million.

On the flip side, if Disney underperforms 75 percent of the rest of the S&P 500, he could get a zero bonus rather than the roughly $79 million he might have received under the old plan.

Disney says the break-even point — where he will earn as much under the new plan as he did under the old one — occurs if Disney shares outperform 60.5 percent of the rest of the S&P 500.

In a nutshell, Disney increased the base number of stock units to 937,599 while it used to be 687,898, but it also reduced the maximum of 150 percent of those units down to 125 percent, while adding in a zero percent at bottom-most rung.

There are lots more scenarios between the top and bottom, basically all designed to reward Iger should his strategy of acquiring most of 21st Century Fox for $71 billion lead to stock gains or penalize him if it does not.

Iger can also get a maximum of 100 percent of those 937,599 shares should Disney's stock fall between now and the end of 2021, though only if the S&P 500 also falls. That provision protects the CEO should the market crash before he steps down.

Iger's base salary of $3 million annually will be boosted to $3.5 million, and those numbers did not change with the amendment disclosed Monday. Iger typically earns much more than that each year based on yearly stock bonuses that also did not change with Monday's disclosure. In 2017, for example, he earned $36.3 million.

"The decision to implement more rigorous performance criteria reflects feedback received directly from shareholders and underscores Mr. Iger’s and the board’s confidence that the current strategic direction of the company will generate significant value for our shareholders," a Disney spokesperson said.