Here’s a question to ask yourself if you aren’t sure whether media mogul pay reflects merit or cronyism: Did Viacom and CBS executive chairman Sumner Redstone deserve $93M, an 80% year-over-year increase, in the combined compensation he received from the companies in 2013? The answer to this query, and others like it, seems especially relevant here in Deadline’s fourth annual effort to try to make sense of the outsized sums media companies pay their leaders. They’re among the most lavishly compensated in corporate America where CEOs made 206 times what the average worker did in 2011, up from 26.5 times in 1978, economist Thomas Piketty notes in his surprise bestselling new book about growing wealth disparities. That strikes many as fundamentally unfair: The California legislature is weighing a bill that would raise tax rates for companies that give their CEOs more than 100 times the average pay for their workers.
Here’s our contribution to the discussion: a tally of the highest-paid executives in media, with metrics and analysis to help you decide what they’re worth. The chart on the right (click to enlarge) shows media execs whose compensation exceeded $10M in 2013 according to company proxies. Below you’ll find our in-depth look at the top 11 earners on the list. Why 11? That enables us to add Rupert Murdoch, who shouldn’t be left out of any discussion of media wealth and power. Those in this Group of 11 collectively made $448.6M in 2013, +15.6% vs 2012, with their median pay +8.3% to $32.5M.
One of the things you’ll see is how much Redstone contributes to the high level of executive pay in media. He and other leaders at corporations he controls occupy four of the 11 spots on our list. That has a ripple effect: All companies represented here (with a caveat, discussed below, for News Corp) include Viacom and CBS in the list of peers against which they benchmark pay for their own execs. And Redstone isn’t all that unusual. You frequently see high pay at enterprises, like many in media, run by families that own little equity but control decision-making by virtue of their supervoting shares.
Boards usually justify their high outlays by pointing to metrics of company success, which they credit to the CEOs. But while those on this list are smart and shrewd, it’s worth asking how much of their good fortune — including their rising stock prices — also represents good luck. Keep in mind that all of the media powers represented by this year’s top 11 own broadcast and/or pay TV channels. Cable and satellite companies complain that these programmers have oligopoly power to raise prices on distributors. Many are aggressively doing so, which distributors say pressures them to raise your rates. Programmers also benefit from a new source of cash: license fees from digital services including Netflix and Amazon Prime.
Our list and the charts that follow include Deadline’s annual Out-of-Whack analysis. It illustrates not only that CEOs make vastly more than the public. Some boards are far more generous to the top dog than they are to others in the C-suite. That could be a sign that directors are in the CEO’s pocket, or lack confidence in their executive bench, many corporate governance experts say. In any case, research shows that lopsided outlays promote groupthink, damage morale, and often depress a company’s stock price. It’s a judgement call as to how much of a disparity is too much. Yet those who track the phenomenon typically become alarmed when a CEO makes more than three times the median for the four other top execs whose income must be disclosed to shareholders per SEC rules. Eighteen of the 30 companies we monitor and that have filed information for 2013 failed the test, often miserably, up from 14 out of 31 last year.
A few notes on the data: Most comes from information that the SEC requires publicly traded U.S. companies to disclose. That means we don’t have compensation info from some media powers including Sony (based in Japan) or MGM (privately held)…. Regulators require companies to disclose pay figures for the top execs, usually the top 5. We don’t know when a high-ranking, but unlisted, leader at a very large company makes more than a top 5 officer at a smaller one…. We’ve tried to determine whether the CEOs were job creators, but the SEC only requires companies to report year end employment — a figure that can rise for companies that buy properties and fall when they sell…. We made a judgment call to include Internet companies heavily focused on content creation, AOL and Yahoo, but not giants only tangentially involved in media such as Amazon, Facebook, Google, and Twitter…. Also, we’ve provided our admittedly subjective assessment about whether the exec is a flight risk, a potential justification for an over-the-top package.
Here’s our tally of the media world’s top-paid execs in 2013:
1. Sumner Redstone, Executive Chairman Viacom & CBS: $93.4M, +80.5%. CBS paid the 90-year-old executive chairman $57.2M, +83%, while Viacom awarded him $36.2, +77%. What did he do to deserve such prodigious sums and raises? The proxy statements don’t really say, although they show that the biggest jumps were tied to rising stock prices — still recorded as an expense. CBS directors note that while he was executive chairman last year “the Company had exceptional results in key metrics, strengthened its financial position, and executed strategies to create and deliver value to its shareholders and to position the Company for long-term success.” Viacom was more glowing, crediting Redstone’s “leadership and vision” as factors that “enhanced [the company's] financial position and continued to strengthen its overall business in the current economic environment.”
Here’s another ingredient to consider: Redstone controls National Amusements. It owns relatively little of the equity in the two media companies, but it has supervoting shares that give it — and, therefore, him — 80% of the votes at CBS and 79% at Viacom. Flight risk: none.
2. Les Moonves, CBS CEO: $66.9M, +7.7%. Redstone shares with his closest allies. And Mr. Television delivered in 2013. CBS was the industry’s ratings leader. Net income in 2013 rose 19.4% to $1.9B while revenues rose 8.5% to $15.3B. The stock also appreciated 68%, far outpacing the Standard & Poor’s 500. The board credits Moonves’ “leadership in delivering exceptional results.” That covers just about everything CBS did in 2013 including the fee increase it secured from Time Warner Cable after a month-long blackout; sales and syndication deals for shows including Under The Dome, The Good Wife, and Dexter; and “his direct involvement in developing and securing high quality programming and maintaining CBS’ reputation as one of the most highly desirable organizations for top creative talent.”
Did he do this all by himself? His compensation was 3.9 times the median for the four other top execs named in the proxy — and jumps to 6.1 times if you take out Redstone’s huge package. The company ended 2013 with 19,490 full-time and part-time salaried employees, a loss of 1,440 jobs, while project-based staff increased by 210 to 5,210. Flight risk: low.
3. Philippe Dauman, Viacom CEO: $37.2M, +11.1%. We’re still in Redstone’s world where his pals always win. Net income from continuing operations at Viacom rose just 2% to $2.3B in the fiscal year that ended in September mostly because the tax rate fell as Viacom registered more sales overseas. Revenues dropped 1% to $13.8B. Still, shares appreciated nearly 56% as Viacom doubled the size of its share repurchase plan to $20B, raised its dividend, and persuaded the Street that the company had turned a corner after a period of disappointing ratings at Nickelodeon, and sales of Paramount movies. The board praised Dauman and COO Thomas Dooley (see No. 10) for directing the company’s “significant investment in content creation, concluding favorable affiliation arrangements in both traditional and digital distribution, driving ad sales, strengthening our international operations and focusing our motion picture operations, in each case while maintaining cost discipline and enhancing our operating leverage.”
Dauman’s pay was 5.4 times the median for his five closest colleagues during the year, and rises to 6.6 times without Redstone. (Viacom says that the ratio is skewed because the company changed CFOs early in the fiscal year and both had to be listed — giving it six named execs instead of the usual five. It says a more appropriate comparison would take out current CFO Wade Davis, who made $4.3M, but leave in Redstone and Dooley: That would drop Dauman’s ratio to 2.1 times.) While the CEO cut spending, including on movie productions, Viacom added 120 jobs as it ended the year with 10,000 full and part-time employees — but cut project- based staff by 390 to 350. Flight risk: near zero.
4. Bob Iger, Disney CEO: $34.3M, -14.7%. The company poses a dilemma for corporate governance advocates. By most metrics, it’s doing great. Disney’s shares appreciated 24.7% in the fiscal year that ended in September — and has continued to reach all-time highs. Over the period, net profits increased 8% to $6.1B, on revenues of $45B, +7%. Operating income rose at all of the major units, except the movie studio which was down due to the steep drop in DVD sales. The proxy says that “there was broad agreement with the Compensation Committee’s assessment that Mr. Iger’s performance as Chief Executive Officer has been excellent.”
Still, the company’s been stung by annual challenges from shareholder rights supporters. Proxy advisory groups say, among other things, that Disney doesn’t make clear what targets it sets for Iger. That may account for the defensive tone in the company’s latest proxy: Iger’s pay declined in part, because “the Company’s strong results did not overperform against the Committee established performance ranges in fiscal 2013 by the same extraordinary amount as in fiscal 2012,” it says.
Even so, Iger continued to collect rock star pay, 6.1 times the median for Disney’s other top execs, down slightly from 6.4 times in 2012. The company added 9,000 jobs, ending its fiscal year with 175,000 employees. His contract runs to June 2016, when he plans to retire. Flight risk: low.
5. David Zaslav, Discovery Communications CEO: $33.3M, -33.2%. This was the lowest package he has seen since 2009, but don’t feel sorry for the CEO who brings us Shark Week, Here Comes Honey Boo Boo, and Oprah Winfrey. A provision in his contract entitled him to stock awards for three years ending 2012, a $25.3M contribution for the final year that was missing in 2013. But Discovery’s doing well financially, and Zaslav has a new contract running through 2019 that’s heavy on performance-related triggers, and likely will boost his 2014 pay. The company’s stock price appreciated 38% last year. Net income increased 14% to $1.1B with revenues of $5.5B, +23% including $603M from newly acquired businesses.
With the drop in 2013 compensation, Zaslav’s out-of-whack ratio drops to 5.2 times the median for his lieutenants — still disquietingly high although a far sight better than his 13.4 times in 2012. Discovery’s annual report says that it had 5,700 full and part-time employees at the end of 2013, and added 1,200 jobs although many likely came from acquisitions. Flight risk: moderate.
6. Jeffrey Bewkes, Time Warner CEO: $32.5M, +25.5%. His pay grows even as the company shrinks. Bewkes spun off AOL and Time Warner Cable, and is about to get rid of the Time Inc magazine publishing operation. But the board says that he’s been “highly effective and successful as Chairman and CEO, as demonstrated by the Company’s financial results during his tenure” beginning in 2008. Time Warner shares appreciated 46% in 2013. Net income increased 26.2% to $3.7B on revenues of $29.8B, +3.7%. Last year was his first under a new five-year contract. It included big raises but, the proxy notes, all of the increases were in the form of performance-based incentives. “The value Mr. Bewkes will realize depends on future Company financial and stock price performance.”
With his raise, Bewkes’ out-of-whack ratio increases to 5.5 times from 4.5 in 2012. Time Warner had 34,000 employees in 2013, no change in jobs from 2012. Flight risk: low to moderate.
7. Brian Roberts, Comcast CEO: $31.4M, +7.7%. He’s arguably the most powerful exec in media and, with Comcast’s focus on technology, is poised to join the ranks of moguls at Silicon Valley powers including Google, Apple, and Amazon. Roberts controls NBCUniversal as well as the nation’s No. 1 cable and broadband provider — which will become much bigger if it succeeds with its planned $45B acquisition of Time Warner Cable, the No. 2 cable operator. Years of acquisitions and deals diluted the economic value of the shares that Roberts owns at the company founded by his father, Ralph. But due to the magic of dual-class stock, Brian still controls a third of all the voting shares. So…Flight risk: zero. Still, the board benchmarks his pay “to peer chief executive officers of other companies.” It says that he and his lieutenants deserve credit for “achieving such strong performance over the past several years.” Comcast stock appreciated 39.1% in 2013. Net income attributable to the company increased 9.9% to $6.8B on revenues of $64.7B, +3.3%.
The company ended the year with 83,000 full and part-time cable employees, unchanged, and 40,000 at NBCU, a loss of 6,000 jobs. While Roberts’ pay is high, it isn’t out of whack with his colleagues. He makes 1.7 times the median for the four other execs named in the proxy, up from 1.4 times last year. But his colleagues include…
8. Stephen Burke, CEO NBCUniversal: $31.1B, + 18.1%. He scored a raise with a new contract that takes him through mid-2018 and due to “his outstanding work in integrating NBCUniversal and its businesses into Comcast and making extraordinary progress in improving NBCUniversal’s businesses,” the board says in the proxy. Directors also wanted to align his pay to “peer chief executive officers of other companies and by ordinal rank” — whatever that means. Flight risk: moderate.
9. Chris Albrecht, CEO Starz: $30.5M, +136.6%. This is a huge sum for the head of a company that’s a minnow compared to the media whales on this list. But John Malone’s Liberty Media evidently wanted to keep Albrecht happy as it prepared to spin off Starz in January 2013: It gave him a new contract that runs through 2016, and a big slug of stock options — terms that were “based on the familiarity of [Liberty CEO Greg Maffai] and the Old [Liberty Media] compensation committee with the range of total compensation paid by companies of similar size and complexity within our industry.” It didn’t have to worry about angering shareholders; Malone still controls Starz’s supervoting shares that give him 45.5% of the investor votes. Starz shares doubled in value in the year following the spinoff, in part because many on Wall Street believe it’s ripe for a takeover. The company’s a work in progress as it renewed a programming agreement with Sony but prepares to lose Disney films to Netflix beginning in 2016. Net income fell 1% to $$249.8M on revenues of $1.78B, +9%.
Albrecht topped our out-of-whack list: He made 9.9 times the median for his four top colleagues, up from 7.8 times in 2012. Starz had 959 full and part-time employees at year end, adding 33 jobs. Flight risk: moderate.
10. Thomas Dooley, Viacom COO: $29.1M, +10.5%. We’re back in Redstone’s world. The proxy makes it clear that the company sees Dooley as virtually Dauman’s partner, so there’s little to add from the discussion above. The COO’s contract from 2010 runs through 2016. For 2014 his base salary will increase 20% to $3M while his target equity award rises 25% to $12M, reflecting “the Compensation Committee’s evaluation of Mr. Dooley’s performance and other factors.” Flight risk: moderate.
11. Rupert Murdoch, News Corp.: $28.9M, -3.7%. The most recent compensation data for Murdoch’s empire covers the fiscal year that ended in June, before News Corp split into two companies. It has been eager to depict itself as a good corporate citizen following the company’s UK phone hacking scandals. “We closely link pay to performance,” the proxy says — and Murdoch wasn’t guaranteed “any salary or severance with respect to his employment.” The board also makes clear that while it looks at compensation at companies including Viacom and CBS it does so only “to obtain a general understanding of current compensation practices.” Benchmarking, it adds, “does not provide a meaningful basis for establishing compensation.”
Not that Murdoch has to worry, once again, thanks to the supervoting shares that give him control over about 40% of all investor votes. You won’t be surprised that the board credited Murdoch for the 46% appreciation in News Corp shares over the fiscal year. The company’s net income increased more than 500% to $7B on revenues of $27.7B, +10.5%. “Under his direction, the Company finished fiscal 2013 with immense financial flexibility, solid strategic positioning and vigorous operating momentum that will drive future growth,” the board says.
Directors gave him performance stock units — designed to make execs more responsive to shareholders — even though he’s already the top investor because the board “believes in providing the same type of incentive compensation opportunities to each of the named executive officers who are responsible for the Company’s overall operations.” So why did Murdoch’s package decline? It all comes from a drop in the present value of his pension which “may not represent, nor does it affect, the value that a named executive officer will actually accrue under the Company’s pension plans during any given fiscal year.”
But Murdoch shared with his colleagues. His pay was 2.0 times the median for others, up just a tad from 1.8 times in 2012. The board agrees with the premise of our out-of-whack analysis, saying that “internal pay parity is critical to ensuring fairness and encouraging a collaborative team effort.” News Corp had 25,600 full time employees in June, a loss of 22,400 jobs in a year when it bought and sold several properties. Flight risk: nil.
Now that you’ve seen the top 11, here are the CEOs whose pay was most, and least, out of whack vs their colleagues (defined as at least three times the median for the four listed non CEOs). Note: Liberty Media, often a high payer, is not included because it hasn’t yet filed a proxy for 2013.