Media moguls on elevated pay scale
When an executive runs a company whose success depends on stars — whether they are richly rewarded TV news anchors or generously compensated movie idols — it is only fitting that the boss is paid, well, like a star.
Call it the Katie Couric Syndrome.
That’s one take-away from a Los Angeles Times survey of compensation packages of media and entertainment company executives. While the nation’s CEOs in general typically saw their earnings slip in 2009, the men — and they’re all men — at the top of the conglomerates that operate the TV networks, movie studios, cable systems and other outposts of the media world continued to command pay packages on par with, and in some cases far higher than, A-list actors.
Walt Disney Co. Chief Executive Bob Iger collected a package worth nearly $24 million for 2009. Philippe Dauman, who manages Viacom Inc., which includes the MTV networks, Comedy Central and Paramount Pictures, got an almost 22% raise to $34 million. CBS Corp. chief Leslie Moonves’ pay more than doubled to $43.2 million. News Corp.'s Rupert Murdoch topped $22 million, and Time Warner Inc.'s Jeffrey Bewkes received nearly $20 million.
“The explanation you hear for entertainment company CEOs is that they have a lot of people in their company — like Katie Couric — who get paid these high salaries, and the CEO thinks, ‘I run the company, why should I get paid less?’ ” said Paul Hodgson, senior research associate at the Corporate Library. (CBS pays Couric about $15 million a year.)
That might have been OK a decade ago during the gravy-train years of the entertainment industry, when it seemed there could never be enough movies or TV shows to feed the “content” pipeline.
But for the last two years the content business has been under assault.
Media companies have laid off thousands of employees, cut TV and movie production budgets and crunched news divisions as the economic moorings of their businesses were eroded by declining DVD sales, a slowdown in advertising and the migration of viewers to the Internet and other forms of entertainment.
Median compensation in 2009 for CEOs of 342 companies in the S&P 500 fell 8% from the previous year to $7.5 million, according to a survey by the Northern California executive compensation research firm Equilar. It was the second year in a row that overall compensation dropped.
By comparison, full-year median compensation for executives managing the companies included in the Times survey was $15.9 million in 2009 — substantially higher than the median of, for example, healthcare company CEOs, which Equilar estimates was $10.5 million last year.
Media companies that are still run like family businesses hand out some of the biggest paychecks.
Murdoch, for example, received the highest base salary among the media chiefs — $8.1 million — which means the 79-year-old mogul is guaranteed at least that much even if his company has a terrible year. Corporate governance experts frown on such arrangements, preferring to see executive pay tied more closely to a company’s performance.
“The base salaries at News Corp. are quite obscene, really,” said Hodgson. He noted the average base salary for S&P 500 chiefs was “just over $1 million” annually.
Comcast Corp. CEO Brian Roberts collected $27.2 million in 2009 and his No. 2, Steve Burke, hauled in $34 million, which included a handsome bonus and stock awards for renewing his contract and a raise to reflect his expanding responsibilities. Burke is expected to soon be managing NBC Universal after the pending merger with Comcast receives federal approval.
Moonves earned the distinction of collecting the largest pay of media CEOs, when calculating cash and stock awards, even though CBS is considerably smaller than Disney, News Corp., Time Warner Inc. and Comcast.
At the very top of the survey was Greg Maffei, chief executive of Liberty Media, which includes the QVC shopping channel and the premium movie channel Stars. Maffei’s package was valued $87.5 million, including $79 million in stock options that vest after four years. Because of a Securities and Exchange Commission rule change, companies must record the present value of the stock option awards during the year they were made.
DreamWorks Animation CEO Jeffrey Katzenberg’s compensation also soared because of the accounting change. His package was worth $23.4 million, almost entirely in stock and options that vest in several years. Meanwhile, Katzenberg collected an annual paycheck of $1.
For several companies, including CBS and Viacom, a dramatic rebound in stock value pumped up pay. “These companies have been doing quite well in the market during the last year, so it is not surprising to see the pay go up,” said Aaron Boyd, research analyst with Equilar.
Doing quite well, yes, but that’s in comparison to quite dismal lows. CBS stock is trading at about $16 a share, quadruple its recessionary nadir last year but well off its peak in 2007 of above $30 a share.
There also is the benefit of longevity.
“A lot of these guys have been around for years and they helped establish their companies, like Moonves, Murdoch and Barry Diller,” said Boyd. “For them, it is probably easier to make the case that they should have a certain pay because they have played such an important role.”
However, Corporate Library, an independent corporate governance research firm based in Portland, Maine, pointed out that company founders and other “executive chairmen” can take advantage of their influence. “Many executive chairs have no operational role within their companies but are paid like high-level executives,” a recent report by the firm found. It said Sumner Redstone, who is executive chairman of both CBS and Viacom Inc., was one of the highest paid.
Last year, Redstone, who turns 87 this month, received $33.1 million as chairman of his two companies. He spends much of his time at his estate perched above Beverly Hills with his long-haired dachshunds.
But where are the watchdogs?
“It ultimately comes down to the board of directors. Should these directors ‘just say no’ to the CEOs?” asked Charles Elson, a professor at the University of Delaware who specializes in corporate governance. “How independent are they from the management of the company? These boards should be negotiating in the best interests of shareholders.”
Standing up to a strong CEO can backfire. If a board cuts a CEO’s salary, the executive could become bitter and leave. That could destabilize the company and cost it much more than what was saved by paring the salary, said James F. Reda, a New York-based executive compensation consultant.
Still, Reda predicts that in five years entertainment chiefs won’t rake in such hefty rewards. He compared media moguls to the steel barons and railroad titans of the 1930s. Captains of those industries are now much further down the corporate pay scale.
“The whole move to digital doesn’t bode well for entertainment companies,” he said. “These big compensation packages are something of a holdover, and the profit margins do not support them. There is going to be a tipping point and then you will see this begin to trend down. But for now, there is a lot of inertia.”