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The value of his compensation package rose more than 360 percent from 2013 to become one of the biggest in corporate America in recent years as the head of the cable networks company got big stock and options awards for signing a new long-term employment contract in January 2014 designed to keep him at Discovery through 2019, a regulatory filing late Friday shows.
Last year, media mogul John Malone also gave the CEO voting and purchase rights to Malone’s big voting stake in Discovery in case Malone can’t vote or ever decides to sell his stock.
Zaslav received stock awards in 2014 that were valued at nearly $94.6 million when granted, according to the Discovery filing, providing the biggest boost over the previous year. The CEO had in 2012 gotten $25.3 million in stock awards, while in 2013 he didn’t receive any.
His option awards were $50.5 million in 2014 compared with $22.5 million in 2013 and $15.8 million in 2012. Zaslav is incentivized to stay at the company to benefit from the awards as they vest over time and is also incentivized to ensure a strong company performance. The big, onetime stock and option awards will not recur through the rest of Zaslav’s contract, with awards instead set to return to normalized levels.
His salary remained unchanged at $3 million, while nonequity incentive plan compensation rose from $5.8 million to nearly $6.1 million. “Other” compensation, including basic life insurance, disability and long-term care coverage and 401k matching contributions, dropped from $2.0 million in 2013 to $1.9 million in 2014.
“The board had several goals with Mr. Zaslav’s new contract,” Discovery said in a regulatory filing. “In addition to recognizing the substantial value he already has created for the company, this fixed-term contract secured Mr. Zaslav to a long-term agreement that provides Discovery certainty and stability. The contract also allowed the company to structure an agreement around performance-based long-term equity, ties materially the vast majority of his compensation to increases in shareholder value, requires him to hold the majority of the equity distributed to him beyond the term of his contract (absent an intervening change in control or termination of employment), and, through ownership of a significant number of shares, will further align his interests with those of our stockholders.”
Overall, Zaslav’s six-year contract sees “the vast majority of compensation delivered in the form of Discovery equity that directly ties him to Discovery’s long-term performance and shareholder interests,” the filing said. “These performance-based grants require Discovery to meet financial targets or increase shareholder value by increasing the share price of Discovery stock in order to pay out.”
It added: “The bulk of Mr. Zaslav’s compensation is tied to Discovery’s stock performance, in the form of performance-based restricted stock units and cash- and stock-settled stock appreciation rights. A significant amount of the equity awards are made in the first year, vesting over time, with smaller awards from 2015 to 2018.”
The filing highlighted the “large one-time equity award” in 2014 “to drive immediate shareholder alignment and encourage long-term ownership of our stock.” It added: “This contract rewards Mr. Zaslav for the value he has created and the continued strategic direction he provides and requires sustained performance over time for that award to have value. At the end of his contract, Mr. Zaslav will own a substantial amount of equity of Discovery, which reinforces his alignment with our shareholders and encourages long-term ownership of our stock.”
The filing also said: “Over the course of his tenure as CEO for the last seven years, Mr. Zaslav has done an outstanding job leading Discovery. He has driven our strong financial performance, created significant shareholder value and ultimately transformed the company into a global leader in pay television. Mr. Zaslav’s contributions have paved the way for Discovery’s growth. Under his leadership, our market capitalization has risen from $5 billion to $20 billion, our global portfolio of television networks has expanded from reaching approximately 280 million cumulative worldwide subscribers in 2008 to nearly 2.6 billion cumulative worldwide subscribers, and our award-winning content has continued to draw growing audiences around the world.”
Revenue has grown from $3.4 billion in 2008 to $6.3 billion in 2014 under Zaslav’s leadership, and adjusted operating income before depreciation and amortization grew from $1.3 billion to $2.5 billion, the filing also highlighted.
But Discovery’s stock dropped about 25 percent in 2014, adjusted for certain items.
Zaslav’s 2014 compensation package is expected to draw comparisons to Apple CEO Tim Cook‘s 2011 package, which was worth $378 million, with nearly all of it coming in long-term stock awards. Aaron Boyd, director of governance research at executive compensation research firm Equilar, said the Cook package was the largest in corporate America over the past decade.
For 2013, Equilar listed Cheniere Energy CEO Charif Souki as the highest-compensated CEO in the U.S. with nearly $142 million, with Zaslav ranking 15th (behind the likes of CBS Corp. CEO Leslie Moonves, Viacom CEO Philippe Dauman and Walt Disney CEO Bob Iger).
According to Friday’s regulatory filing, Zaslav gets a car allowance of $1,400 per month and is entitled to use the company’s aircraft for up to 200 hours of personal use per year. “The company shall pay for the first 100 hours of personal use and Mr. Zaslav shall reimburse the company for personal use in excess of 100 hours,” it said.
Zaslav has lauded recent Discovery Channel ratings gains after weaker trends last year. But his team has said that the advertising outlook remains somewhat unclear.
Discovery’s second-highest-paid executive of 2014 was Bruce Campbell, chief development and digital officer and general counsel. His compensation package was worth $7.6 million, up from $5.1 million in 2013. CFO Andy Warren made nearly $7.0 million, up from $4.4 million, while company founder John Hendricks‘ pay package amounted to $6.5 million, down from $7.8 million in 2013. JB Perrette, the president of Discovery’s international operations who was appointed in early 2014, got a compensation package worth $4.9 million in 2014.
Discovery’s filing on Friday also disclosed a shareholder proposal that will be voted on at the company’s annual meeting in May. “Shareholders request that the board of directors report to shareholders by September 2015, at reasonable expense and omitting proprietary information, on plans to increase diverse representation on the board as well as an assessment of the effectiveness of these efforts,” a summary of the proposal said. “The report should include a description of how the nominating and corporate governance committee, consistent with its fiduciary duties, takes every reasonable step to include women and minority candidates in the pool from which board nominees are chosen.”
Discovery’s board suggested that shareholders vote against the proposal. “The company’s current director nomination process allows for identification of the best possible nominees for director, regardless of their gender, racial background, religion or ethnicity,” it argued in the filing. “The board of directors acknowledges the benefits of diversity throughout the company. For example, globally, 46% of our executive team is female and 42 percent of our U.S. executive team is female, resulting in Discovery ranking first in percentage of female managers in our industry in the U.S. and second for female executives (senior vice president and above) in our industry in the U.S. We also have strong ethnic minority representation in our employee base, at 37 percent of our U.S. employee base, as compared to the U.S. industry average of 32 percent.”
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