Report calls media CEO pay "out of whack"


New Executive Editor David Lieberman at Nikki Finke’s Deadline entertainment/media news website has blasted the boards of major media companies for paying CEOs outlandish amounts. The most “out of whack” compensation on his list is not for the head honcho at a mega-media company such as Viacom or Time Warner, although they make the list, but rather radio’s Entercom.

Lieberman’s premise is this: That investors should question the compensation package of a CEO if he/she receives triple the average of the company’s next four top executives. Lieberman, who recently joined Deadline after a long career at USA Today, gleaned data from SEC filings and pronounced Entercom “off the charts” in terms of CEO compensation for paying David Field 25.4 times the average of the next four top execs at the company. His $9.1 million total, mostly $7.9 million in stock, hardly compared to the $84.5 million paid to Viacom CEO Philippe Dauman, but topped Lieberman’s list in terms of its multiple of the compensation paid to other top execs of the same company. Viacom, by the way, ranked third on the list, with Dauman paid 7.9 times the average of the next four at the company.

Most of the companies on the list appear regularly in RBR-TVBR reports. Names such as Discovery Communications, DirecTV, Nielsen, CBS Corp., Time Warner, Martha Stewart Living Omnimedia, AOL, Time Warner Cable, Lionsgate, Sirius XM and Disney. Click here to read the article.

In all, Lieberman said he analyzed 35 media companies which have public stock and report to the SEC. Of those, 16 failed the test – “often miserably” he noted.

RBR-TVBR observation: In the past we have taken issue with the way compensation totals for CEOs were calculated for such comparisons, since stock options don’t really have the value that companies are forced to ascribe to them for SEC reporting purposes. In fact, they can turn out to be worthless. But options are slowly going away and being replaced by outright grants of stock or restricted stock grants that vest fairly rapidly – and those grants have real, quantifiable value. So Lieberman’s numbers are, for the most part, valid.

Why is CEO compensation out of whack – and not just for media companies, but for lots and lots of US companies? It is the cult of the CEO. The boards of directors of public companies tend to be comprised of current and former CEOs who believe in the cult of the CEO because it has rewarded them so well. The idea that the CEO – even a really great one – contributes several times the value to the company of the #2 executive (who often is in line to become CEO) is ludicrous.

And the truth is that there aren’t very many great CEOs who deserve humongous compensation packages for turning a failing company into a winner. But CEOs tend to be like the children of Garrison Keillor’s fictional Lake Wobegon: all above average. No board of directors wants to admit that it hired an average CEO, so nearly all are paid based on comparison to peer companies, even if some of those peers have truly exceptional CEOs. That just keeps ratcheting up CEO compensation. In truth, simple math would tell you that 49% of all public companies have below average CEOs.