Walt Disney Co.
Summary:
The former CEO Michael Eisner's influence appears to have set up a tradition of paying the executives at Disney an extraordinary amount. The Committee, for its part, seems to be making bad decision after bad decision. Where does the madness end? Wait a second, how much are those Committee members getting paid?...
Analysis:
The current economy is slowing down many of the businesses in the Recreation Industry, but not Disney. Disney is performing very well, especially compared to the rest of the pack. The company's stock price has gone from a low of $13.50 in 2000 to a recent high of $36.80 in 2007. The company's performance has also been solid. Theme park attendance is up, ESPN is at the top of its game, and releases of several new feature films, like WALL-E, have been very successful.
So if the company is doing so well you would expect management to be rewarded for their performance. With Disney, this is indeed the case. The question then becomes, is the reward too high and is the reward indeed tied to the company's performance? For Disney, yes its too high, but more importantly, much of it is not due to the performance of the company, but rather the lawyer who drafted the executive contracts.
So… What Are They Paid?
How high is too high? How about CEO Robert Iger being paid: $2 million in base salary, $8 million in stock awards, and $13.7 million in bonuses. That's much more than most other CEOs from the DOW Jones Industrial checklist. Still not convinced? What if we told you that $9.25 million was guaranteed to the CEO? Mr. Iger made sure to write minimums of $2 million and $7.25 million into his agreement for his salary and bonus, respectively. That means he's guaranteed $9.25 million. Plus, where's the incentive?
Tack on another $660,000 for security, and you have a very wealthy man with an entourage.
Well shareholders, should you thus lobby the Board of Directors to cut bait with the CEO? Maybe they can rework a new deal with him right? Wrong. Looks like that might be a problem too with a minimum cash severance of $18.5 million, estimated to be more like $23.8 million. Add in a Change in Control trigger, and the payout could be as high as $100 million!
But the Committee's issues don't stop there. Even when they are not ruled by the terms of a contract, they act as though Disney shareholders have given them a blank checkbook. Case in point – Senior Executive Vice President, Alan Braverman signed an agreement at the end of 2003 with an initial salary of $750,000. This is a pretty high amount, but at least the Committee had discretion over how much his annual raise should be. However, using their discretion, the Committee has decided to more than double Mr. Braverman's salary in a four year period! It currently stands at $1.75 million. Maybe they should just stick to the horrible contract stipulations instead…
Compensation Details:
| CEO | NEO Avg. | |
|---|---|---|
| Base Salary | $2,000,000 | $829,063 |
| Bonus | $0 | $300,000 |
| Stock | $7,931,660 | $1,237,468 |
| Options | $2,243,180 | $673,916 |
| non-Equity Incentives | $13,670,686 | $2,468,500 |
Reference Links:
(1) Annual
Proxy Statement
(2) Annual
Report