Executive Compensation in US media
Here are the excerpts from an interesting piece of analysis by Michael Nathanson and team at Bernstein Research. According to the research, the five media conglomerate (CBS, Viacom, News Corp, Disney & Time Warner) CEOs are paid an average of $27 million — 2.3 times more than the CEOs of other large U.S. corporations. At the top end of the list is CBS’s CEO, Les Moonves, at $36.8 million, while Time Warner’s new CEO Jeff Bewkes received the least at $19.5 million. The median total compensation for CEOs of the largest 250 companies in the S&P 500 Index is $12 million. Media conglomerate CFO’s, while paid materially less than their CEO counterparts (an average of 60% less), were paid an average of $10.8 million each. Viacom’s Tom Dooley was the highest paid at $16.4 million, while Time Warner’s recently-retired CFO Wayne Pace netted the least at $8.4 million.
The bulk of the compensation was driven by bonus plans, which are mostly cash payments. On average, about 44% of CEO and 40% of CFO total compensation was paid through the annual bonus. Base salary accounts for only 13% of CEO total compensation, and 16% of CFO total compensation. Rupert Murdoch was paid a base salary of $8.1m, which is over 3 times higher than the peer average of $2.6m.
The authors conclude that the best compensation plans (for shareholders) are the ones that are most aligned with shareholder interests. In general, the best compensation plans offer a high degree of stock-based compensation and bonus structures tied to fundamental stock drivers. Within the media sector, contend the authors, investors have traded-in their focus on EBITDA generation for EPS growth. So, at the very least, a “good” compensation plan should focus on EPS, not EBITDA, growth. The Bernstein Research favours compensation structures at Disney and News Corp., while claiming that the compensation structure adopted by Viacom and Time Warner as less relevant to investors.
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