Los Angeles Times
WBD ups the ante for execs
Ailing Warner Bros. Discovery boosts CEO’s pay incentives; others in bonus pool.
After a brutal year marked by thousands of layoffs and stock struggles, Warner Bros. Discovery has boosted the financial incentives for its chief executive, David Zaslav, and created a new pool of cash to pay bonuses for its top executives.
In a regulatory filing Monday, the company said it amended Zaslav’s contract to double the number of performance-related restricted stock awards he is eligible for. Under the new arrangement, Zaslav can qualify for at least $12 million in stock awards on top of his salary and other benefits during the years 2023, 2024 and 2025, according to the filing.
Zaslav has long ranked among the highest-paid corporate chieftains in America, even when he ran the relatively small cable programming company Discovery. The 63-year-old executive’s compensation packages have long been loaded with rich stock incentives, which traditionally have benefited him as his company’s stock price soared into the stratosphere.
Last year, Zaslav’s total compensation package was set to exceed $250 million — with nearly three-quarters of that amount, or $202 million — coming from stock options he received as part of a new contract in anticipation of the merger of WarnerMedia and Discovery. However, he hasn’t realized that amount because of Warner Bros. Discovery’s lagging stock price.
Monday’s regulatory filing also noted that a pool of $27 million had been set aside to pay bonuses to other employees. Nearly half of that is earmarked for corporate and financial executives with cash flow and debt-management responsibilities, including Zaslav’s key lieutenants such as Chief Revenue Officer Bruce Campbell, Chief Financial Officer Gunnar Wiedenfels
and Chief Executive of Global Streaming JB Perrette.
Those three executives would each be eligible for $2 million.
The contract changes and bonus pool come in advance of the first anniversary of the rocky union between Discovery and WarnerMedia, the latter of which was previously owned by AT&T. The merger left the combined company burdened with more than $50 billion in debt.
Since the merger, Warner Bros. Discovery has dealt with a more challenging business environment and laid off several thousand workers within HBO, the Warner Bros. film and TV studio and Turner networks, including CNN. It canceled movies, including “Batgirl,” and TV programs in an effort to cut costs and qualify for tax write-offs. It also scaled back the number of “Sesame Street” episodes available for streaming on HBO Max.
The company also quickly pulled the plug on CNN+, a streaming service created by the previous administration.
The motivation for Monday’s increase in potential compensation, according to the regulatory filing, was to “promote and reward achievement of the company’s initiatives with regard to increasing free cash flow and reducing leverage.”
The stock options that make up so much of Zaslav’s compensation package are underwater because of Warner Bros. Discovery’s sluggish share price.
Warner Bros. Discovery stock plummeted last summer as part of an industrywide shift when Wall Street started worrying that media companies were spending too much money building robust streaming services to compete with Netflix in the streaming wars.
Warner Bros. Discovery was also burdened with a mountain of debt. It had to pay AT&T a special dividend of $43 billion as part of the merger last April.
The company’s stock has gained ground in recent months, closing Monday at $15.13, down 2.2%. It has fallen more than 35% from the nearly $25 a share from last April when the new company formed.
Zaslav’s stock options were tied to a $35-a-share stock price for last year.
Now, instead of primarily focusing on boosting the stock, the company has switched its compensation focus to encourage key employees to help find ways to pay down debt and generate free cash flow. The new incentives are tied to those metrics.
“The changes to the Warner Bros. Discovery executive compensation program are designed to further incentivize Company employees, including members of its leadership team and others whose efforts are critical to achieving the key near-term financial objectives of increased free cash flow and reduced leverage,” board Chairman Samuel A. Di Piazza Jr. said in a statement.
“The WBD Board is confident that these additional incentives offer a more competitive package against the backdrop of ongoing industry-wide transformation and economic headwinds, and better position the company to advance core drivers of shareholder value,” Di Piazza said.
Last fall, Warner Bros. Discovery told investors that the cost of the downsizing would exceed $1 billion, because of severances, among other expenses. The company’s goal has been to find more than $3 billion in cost-savings.
Discovery, during its most recent earnings call, said cost-cutting would allow it to improve its financial position sooner than expected.
Separately, the company took out a new loan to repay a portion of its existing debt.
“The company remains highly leveraged and therefore is weakly positioned for its current credit ratings,” Moody’s said in a credit report, which kept the company’s credit rating at Baa3. “The stable outlook reflects Moody’s expectations that subscriber growth from domestic and international expansion of the [direct-toconsumer] streaming platforms will, over time, be able to offset secular pressure.”