Peer pressure and working with costly talent drive rise in remuneration
They’re not Hollywood stars, they’re not TV personalities and they don’t play in a rock band, but their pay packages are in the same league. Six of the 10 highest-paid chief executives last year worked in the media industry, according to a study carried out by executive compensation data firm Equilar and the Associated Press.
The best-paid chief executive of a large American company was David Zaslav, head of Discovery Communications. His total compensation more than quadrupled to US$156.1 million ($215 million) last year after he extended his contract.
Les Moonves, of CBS, held on to second place in the rankings, despite a drop in pay from a year earlier. His pay package totalled US$54.4 million.
The remaining four chief executives, from Viacom, Walt Disney, Comcast and Time Warner, have ranked among the United States’ highest-paid executives for at least four years.
One reason for the high pay in the industry is that its bosses are dealing with well-paid individuals.
“The talent, the actors and directors and writers, they’re being paid a lot of money,” said Steven Kaplan, a professor of finance at the University of Chicago Booth School of Business.
“In industries where the talent makes a lot of money, the CEO makes a lot of money as well.”
Pay packages for chief executives overall grew for the fifth straight year in 2014, driven by a rising stock market that pushed up the value of executive stock awards. Median compensation for the heads of Standard & Poor’s 500 companies rose to a record US$10.6 million, up from US$10.5 million the year before.
Peer pressure is another factor driving up executive compensation. The board members responsible for setting chief executive pay typically consider what the heads of similar companies are making. If pay for one goes up, it will likely go up for others.
For the chieftains of media, there are also other factors boosting pay. Several work at companies where a few major shareholders control the vote.
Media magnate Sumner Redstone controls almost 80 per cent of the voting stock at CBS and Viacom. Because of his large holdings, Redstone can easily override the concerns of other investors about the level of chief executive pay.
Discovery’s voting stock is heavily influenced by the brothers Si and Donald Newhouse and John Malone, another influential investor in the media industry.
At Comcast, which owns NBC and Universal Studios, chief executive and chairman Brian Roberts controls a third of his company’s voting stock. That means he has substantial influence on the pay he is awarded.
All of the media executives have tried, with varying degrees of success, to maximise the value of their company’s entertainment brands online and on mobile devices.
Time Warner, under CEO Jeffrey Bewkes, launched HBO Now, which streams shows to computers, tablets and smartphones for US$15 a month.
At Disney, chief executive Bob Iger has bolstered revenues through canny acquisitions.
Disney spokesman David Jefferson said Iger’s pay award “reflected the company’s outstanding financial performance”, and cited its record earnings. He also said that during Iger’s tenure Disney had returned more than US$51 billion to stockholders through share buybacks and dividends.
Media stocks have climbed strongly in the past five years. An index of media companies in the S&P 500 index has risen 194 per cent compared with a gain of 93 per cent for the broader S&P 500.
Discovery’s stock price has climbed almost fivefold since it started trading as a public company in September 2008. Zaslav, who has led Discovery since 2007, saw his compensation rise last year after he negotiated a new contract that will keep him at the company until 2019.
Last year’s pay package included US$145 million in stock and options awards, US$6 million in cash bonuses, US$3 million in base salary and US$1.9 million in perks.
Equilar assessed data from 338 companies that filed proxy statements with regulators between January 1 and April 30.
To calculate a chief executive’s pay package, Equilar and the AP looked at salary, stock and option awards, perks and bonuses.