It was a year of pain for the entertainment industry and shareholders of (many) media companies with months-long Hollywood strikes and layoffs. Linear television continued to decline and a nascent theatrical recovery went sideways. Most CEOs saw pay packages rise in 2023, some by big multiples.“The pay is egregious, but it is something we have learned to accept,” says one longtime entertainment analyst.Irritants cited: CEOs rewarded for deals before its clear how they’ll pan out; CEOs who should looking for growth but keep cutting; CEO pay packages that feel disproportionate to the size of the company. Paramount Global’s (now ex) CEO Bob Bakish saw compensation of $31 million, a hair lower than Disney’s Bob Iger in his first year back as chief executive.Bakish may also be entitled to severance in the neighborhood of $48.5 million after being ejected earlier this week, according to a “termination scenario” in the company’s proxy. The actual amount isn’t yet public. Par, which is looking, put new severance plans for top executives in place last fall.Proxy statements are annual company reports filed with the SEC that list, among other things, pay for the top five highest-paid executives.Not all companies have calendar years. The figures for Lionsgate, whose fiscal year ended in March of 2023, for Fox, which ends its FY in June, and Disney which has a September fiscal year, are the latest.Topping 2023 is Charter Communications CEO Chris Winfrey, who was named CEO in December of 2022, with a package worth $89 million, the bulk from option awards valued at $75M.The SEC requires equity awards be valued at the time they are granted.Companies note that options vest over years and can remain “under water” depending on the stock price. However, pay consultants say, grants reflect the amount companies would like to pay their CEOs. And, “My experience is that … more often than not, the value of the options will be greater than the value in the proxy statement. It might take five years, and not for everybody, but in general,” says James Reda of Gallagher’s compensation consultancy.Rosanna Landis-Weaver, a pay expert and consultant with nonprofit As You Sow, notes that the strike price for some of Winfrey’s options is $387, well below where the stock was trading a few years ago. “It’s an alignment thing. The idea behind this is to [give CEOs] the same perspective as shareholders. But a shareholder who bought at $600 is not going to be happy to see stock options with [that] strike price for the CEO. The CEO will make money even if the stock only gets part of the way back.”“Giving options granted at the bottom of the market can result in windfalls. And shareholders don’t just buy at the bottom of the market, they buy all the time,” she says.Other option awards have higher vesting hurdles from a stock price of $564 to $1,000.Under Winfrey, Charter notes in the proxy, the company expanded its network, launched its Xumo platform, grew in mobile. In September, the nation’s second largest cabler clinched a landmark carriage deal with Disney. It saw Charter drop some smaller networks and offer the Disney+ ad-supported tier to its Spectrum TV Select subscribers.Charter shares ended 2023 up about 14% at $388. They’re currently trading at about $261.Big proxy advisory firm ISS weighed in on the CEO package ahead of the annual meeting, noting “a front-loaded equity grant, the aggregate magnitude of which is considered excessive.”The executive who has been a poster child for high CEO pay — literally, his 2021 package worth $246 million was among those plastered on WGA and SAG-AFTRA picket signs — was no. 4 this year after Winfrey, Ari Emanuel and Ted Sarandos.That 2021 package was inflated by a $200+ million option grant (for renewing his contract through 2027) and he also got a special $4.4 million cash bonus that year (on top of a $22 million cash bonus) mostly for closing the Warner Media-Discovery merger. The pay then settled a bit, standing at $49.7M for 2023.Warner Bros Discovery has tangled with shareholders over compensation and shifted is plans to focus more on free cash flow, less on stock price. FCF is what a company generates after operating expenses, including capital investment. It is important, because it allows Warner Bros Discovery to pay down debt.The stock ended 2023 up 20% for the year at over $11. It’s currently down at under $8 again. Some analysts, while rooting for a turnaround, are pulling out their hair with the shares dramatically underperforming the S&P 500 for the last five years (including legacy Discovery).Warner Bros Discovery’s proxy say Zaslav’s package was tied to his “exceptional leadership” in the face of many difficulties, including a “once-in-a-generation work stoppage in our industry during 2023 as both WGA and SAG-AFTRA went out on strike for several months.”Labor action swept the nation last year year, from actors to auto workers. Sarah Anderson, an executive compensation analyst at the progressive Institute for Policy Studies, says Ford employees felt equally miffed when they saw their chief executive’s pay. “I know that the people who had been striking were like, ‘Look, they dragged out that strike this long, quibbling … and look what” the CEO made.Warner Bros Discovery noted shifting ad spend, continued weakness in linear television viewing, increased competition from both traditional media companies and big tech players in the media space as well as the lingering effects of Covid on movie theater attendance, and general macroeconomic conditions.It’s true that the media business feels impossibly complicated right now for most. “If you’re going to get the person that you want to lead the company through all this change, you’re going to have to pay them … to overpay. Because it’s a really big job navigating these companies through all these changes without any guarantee of success,” Reda says. “If you have the wrong strategy, you could be extinct in three years.”The strike, amid a wave of labor action this summer, upended the business for six months and is still having ripple effects. But it coincided with a bursting of the peak TV bubble, something many feel was bound to happen anyway. Production had exploded as Netflix and newer streamers entering the market raced for subscribers. But streaming losses weren’t sustainable and they pulled back. Traditional media companies have taken big write-downs over the past year as they shifted content strategy, including canceling and killing projects and removing shows from their platforms.Reda says the proxies in so far across industries show median CEO pay up about 10%, although that could rise when the rest come in. According to an ISS-Corporate analysis of 343 large-cap companies, median pay so far for 2023 is about $15.7 million (the median being the point where half earn more and half less).Netflix has two CEOs, an expensive proposition. And it was scorched by shareholders ‘say on pay’ vote at its annual meeting last year, with less than 30% approving compensation (the average across industries is about 90%, Landis-Weaver says). The votes are not binding but a low number is not a good look.The company now requires CEOs to take at least 50% of their compensation in equity. Until 2023, they could choose the mix themselves (resulting in some high cash salaries for Sarandos not seen at other companies). “That was a rather radical change. They didn’t make it because they saw the errors of their ways, but because shareholders demanded it,” said Landis-Weaver. The company also pushed out the vesting time for options to three years from one.“If anyone in the business deserves it, it’s the Netflix guys. The stock has performed and it’s the best positioned of all media companies today,” says one Wall Streeter.Ari Emanuel was no. 2 with $84 million as CEO of Endeavor and of TKO Group. Comcast’s Brian Roberts, Nexstar CEO Perry Sook, Roku’s Anthony Wood and Adam Aron, CEO of AMC Networks are in the top ten, as is AMC Entertainment chief executive Adam Aron (the latter raising some eyebrows with a package worth $25 million, although he is managing to keep the company afloat).A big thing, this year and always — corporate aircraft, which lives in the “other compensation” line for CEOs. It’s prominent across sectors, very much including media. Jet love jumped into view when Endeavor said that both CEO Emanuel and executive chair Patrick Whitesell will receive one of its private planes as the company goes private.A Wall Street Journal story this week looked at this, calculating that amounts listed for the cost of trips are sometimes pegged well below what they should be, singling out Bob Iger and Netflix founder and executive chair Reed Hastings among others. In February, the IRS said it plans to start auditing personal use of corporate aircraft by executives.When setting pay, media companies “consider the ability to attract and retain executives.” They look at compensation across their peer group. Says Anderson: It’s the ‘Lake Wobegon’ effect, every child is above average.”
© 2024 Deadline.