MEDIA MONEYBAGS
HOW INDUSTRY BARONS ESTABLISHED A CULTURE THAT REWARDS THEM IN GOOD TIMES … AND IN BAD
MEDIA CHIEFTAINS don’t suffer from low self-esteem. Industry titans including Bob Iger, Reed Hastings and Rupert Murdoch probably need big egos to believe they’re entitled to make far more than most CEOS at similarly sized companies — and much more for 12 months of work than an average employee could make in several lifetimes. ¶ It would take about 410 years for a typical employee at AT&T, Comcast, Discovery, Disney, Fox, Lionsgate, Netflix or Viacomcbs to match the $37.6 million median size of the packages paid to each CEO last year, according to their most recent proxies. ¶ But the period of outsize, some might even say gluttonous, compensation may be over — at least for now. The COVID-19 crisis and resulting recession have led to massive layoffs at companies including Comcast, Disney and Viacomcbs, and intensified scrutiny into how their boards reward their leaders.
“Change is coming,” predicts Rosanna Landis Weaver, program manager of shareholder advocacy group As You Sow. “There’s a lot of populist outrage over this, and this level of inequality is destabilizing.” Some have made a show of shared sacrifice by forgoing their salaries, but not the bonuses and stock awards that account for the bulk of their compensation. “The message that they’re sending is that ‘We’re all in this together,’” says Robin Ferracone, CEO of Farient Advisors, a performance advisory and strategic compensation firm. “It’s not going to save the companies that much money. But it’s an important step when people are losing their jobs.” Will this sense of solidarity last? Perhaps. The images of extravagance that emerge from Variety’s annual deep-dive look at CEO compensation might seem like snapshots from a time gone by if COVID-19 stay-at-home mandates accelerate consumers’ shift from theatrical movies and cable television programming bundles to less expensive — but also lower-margin and riskier — streaming services from giants led by Netflix. Charles Elson, director of the University of Delaware’s John L. Weinberg Center for Corporate Governance, is skeptical. “Companies may emerge from this and shrink their workforces,” he says. “But somehow I think media executive salaries will return to normal.” To be sure, media boards have a track record of rewarding CEOS in bad times as well as good. Investor advisory consultant Institutional
410 YEARS FOR A TYPICAL EMPLOYEE TO MATCH THE $37.6 MILLION MEDIAN SIZE OF THE PACKAGES PAID TO EACH CEO LAST YEAR
Shareholder Services gave all of the companies Variety tracks — except AT&T and Disney — the lowest possible score for what it calls “governance risk.” That’s due in part to the dual-class shareholder system at the likes of Viacomcbs and Comcast, which give controlling shareholders Shari Redstone and Brian Roberts virtually absolute authority. Corporate boards, composed of loyalists, often rubber-stamp exorbitant pay packages and ensure that bonus goals remain within reach. That creates a skewed compensation picture for other companies, including Disney and AT&T, that don’t have dual-class control. They feel competitive pressure to benchmark their executives’ pay against their rivals’. “Media firms live in a Lake Wobegon world,” says Lawrence Mishel, distinguished fellow at the Economic Policy Institute, referencing the fictional town created by Garrison Keillor where all of the children are exceptional. “Everyone believes their executives are above average and that their pay should be above average.” But the widely reported top-line CEO salary numbers provide an incomplete, and often distorted, picture of a company’s pay and priorities. Take the 2019 compensation for our eight Big Media chiefs. The official numbers add up to $285.7 million. That massive total ignores stock holdings. Hastings’ Netflix stock is worth $4.1 billion and has appreciated $1.1 billion since the beginning of 2020 — dwarfing the $38.6 million he received in 2019 compensation. And many CEOS make additional money elsewhere; Fox’s Rupert Murdoch collected $5 million at News Corp., which he also controls. The pay packages are justified by claiming they are needed to retain their top talent. However, CEOS of these public firms are rarely recruited by competitors, who prefer to promote from within. “They’re not Lebron James, who can take his skills anywhere and improve a team,” notes “The CEO Pay Machine” author Steven Clifford. Media companies say the lopsided compensation reflects CEOS’ performance — especially when the stock price rises. But the nation’s largest companies no longer believe that’s the appropriate yardstick for their achievements. In August, Business Roundtable announced a surprising philosophical shift when it said that companies owe loyalty to customers, employees, suppliers and communities as well as shareholders. To reflect that, we’ve added assessments of each company from JUST Capital — a nonpartisan nonprofit that advocates stakeholder capitalism, which considers corporate policies affecting workers, customers, communities, the environment and shareholders. The new light casts unflattering shadows on some of the chiefs in our group. Take Iger. The Disney executive chairman’s $47.5 million package made him our highest-paid chief for 2019. It would take 911 years for average Disney employees — a group that includes low paid theme park workers — to make as much as he did last year. But his company ranked 858 among the 922 that JUST Capital analyzed in paying workers a living wage, 893 in charging fair prices for its products or services and 908 in paying the CEO fairly in relation to workers. Fox, which paid Rupert Murdoch $42.2 million in 2019, ranked 882 among all companies in the diversity and inclusiveness of its workplace. And Comcast, where Brian Roberts made $36.4 million, was 916 in customer service. Somehow those dismal assessments were not reflected in their take-home pay.