A Look at Exec Comp in US Media

Michael Nathanson and team at Bernstein commissioned a research to analyze how executives are compensated at big 5 US media conglomerates: Disney, Time Warner, Viacom, News Corp. amd CBS. Below, I have captured the summary of their findings.

As per data from 2007 filings, Total Compensation from Bonus is as follows:

At Disney: 49.4% of CEO’s compensation and 49.2% of CFO’s compensation is comprised of bonus.

At Time Warner: 35.8% of CEO’s compensation and 30.9% of CFO’s compensation is comprised of bonus.

At Viacom: 34.0% of CEO’s compensation and 34.1% of CFO’s compensation is comprised of bonus.

At News Corp: 49.2% of CEO’s compensation and 34.8% of CFO’s compensation is comprised of bonus.

At CBS: 50.2% of CEO’s compensation and 50.0% of CFO’s compensation is comprised of bonus.

Disney has multiple quantifiable factors for determining executive bonuses. These factors include (in order of importance): EPS targets (28.6% of weighting), operating income growth and earnings net of capital charge targets (25% each) and after-tax free cash flow growth targets (21.4%). Achieving or beating benchmarks within these metrics determines 70% of the bonus payment, while the remaining 30% is based on the compensation committee's subjective assessment of the executive's performance. Disney also adjusts its bonus payments by a factor that rewards or penalizes management for Disney's stock performance relative to the returns of the S&P 500 Index.

Time Warner's bonus structure is based on two factors which determine 70% of the bonus payment: Adjusted EBITDA growth (70% weighting) and free cash flow (30% weighting). The remaining 30% of the bonus payment is based on the attainment of individual goals.

Viacom's bonus compensation is based on three factors: Operating income growth (60% of weighting), operating cash flow less CAPEX (20%), and undisclosed qualitative factors (20%).

News Corp.'s management is paid on only one quantifiable metric – EPS growth.

In CBS's proxy, there are no pre-determined formulas or quantifiable metrics to determine bonus amounts. Rather, the proxy states that bonus awards are "subjective" and take into account many factors, like budgeted EBITDA and free cash flow, increasing the quarterly dividend, repurchasing shares, and expanding the company's digital presence.