Viacom's Dauman, Charter's Rutledge Top Pay-TV Pay Ranks in '16

Financially, Philippe Dauman had a good 2016, with Viacom's former CEO topping the ranks of pay-TV executives in salary and other non-equity compensation, according to our analysis of 2016 proxy statements of publicly traded companies in the pay-TV universe. Benefiting Dauman was a $58 million separation payment he received in August when he left (see 1608220029). That came atop his $3.6 million salary and $9.7 million cash bonus under Viacom's executive short-term incentive plan. He also received equity in the form of Viacom stock and options that the programmer valued at more than $21 million. The company didn't comment. In our analysis, we looked at compensation as two separate silos -- salary and other non-equity items; and stock and stock options. We used dollar value estimates of the equity awards as reported by the companies, and not estimates of future values.

When looking strictly at equity compensation, meanwhile, Charter Communications CEO Tom Rutledge had the best 2016, with stock and options awards totaling almost $88.1 million -- that vs. $9.6 million in salary and other cash and non-equity compensation. Charter said the 2016 equity payouts to Rutledge and other top executives were five-year awards, not annual, and it said those equity payments are designed to not pay out unless the stock sees at least 30 percent growth over a six-year period.

In recent years, companies have been largely "towing the line" with regard to salaries, and raises usually averaging around 3 percent, David Seitz, managing director at executive compensation consultant Pearl Meyer, told us. That was often the case among pay-TV execs seeing salary increases, with examples including a 2.9 percent salary raise in 2016 for Comcast CEO Brian Roberts, 2.8 percent for Dish Network CEO Charlie Ergen and 2.9 percent for AT&T CEO Randall Stephenson. One exception was Scripps Interactive Network CEO Ken Lowe, who received a nearly 15 percent salary hike to nearly $1.7 million, the result of a new employment contract with the company that year, SNI said.

Of the 24 MVPDs, programmers and over-the-top operators we analyzed, the average CEO salary in 2016 was roughly $1.8 million. The average equity award of stock and options combined was $14.4 million. Few of the companies give non-equity cash bonuses, though CBS is an exception, with CEO Leslie Moonves receiving $32 million in 2016.

The lowest-compensated executive in our analysis was Amazon CEO Jeff Bezos, with a salary of $81,640 and $1.6 million worth of security arrangements. The web retailer said Bezos -- citing his sizable ownership of the company -- asked not to receive a raise and has never received cash compensation greater than that amount. It said he has never received stock-based Amazon compensation. Bezos as of February personally owned 17 percent of Amazon.

Over the past 25 years, growth in executive pay has largely been driven by long-term incentives in the form of stock-based incentives, Seitz said. Among pay-TV executives in our analysis, there were some jumps in stock- and options-based compensation: a 9.8 increase for AT&T's Stephenson, to more than $16 million; a 20 percent increase for Discovery Communications CEO David Zaslav, to more than $26 million; a 41 percent bump for Gray Television Chairman-CEO Hilton Howell, to $19.1 million; and a nearly 44 percent hike for Netflix CEO Reed Hastings, to just shy of $22.3 million.

At Comcast, NBCUniversal CEO Stephen Burke did better in equity in 2016 than Roberts, his boss, with Burke receiving $15.4 million worth of stock options alongside $5.3 million in stock while Roberts received $5.3 million in options and $5.3 million in stock. Burke in August signed a new employment agreement with Comcast, the company said.

Long-term incentive bonuses reflected in next year's proxy statements could show a notable jump, Seitz said. Since the November election, stock prices have surged, and most companies make their stock grant awards in Q1, he said. He said long-term incentive awards typically go the same direction as the stock market overall, though not necessarily as steeply.

While U.S. executive compensation packages still lead the world, generally, "more and more countries are catching up," especially as the number of countries where granting equity has grown considerably in recent years, said Dave Hofrichter, Aon Hewitt executive compensation and governance leader. Companies "are now granting equity in China -- obviously under different rules," he said.

Whether pay-TV companies will have to start comparing their top executives' compensation packages with the average of all employees is up in the air. The Dodd-Frank Act required CEO pay ratio reporting was to take place starting with reporting of FY 2017. Given Trump administration statements about wanting to undo Dodd-Frank, "It's really hard for anybody to predict," Seitz said. "Most companies are in a wait-and-see mode." If it does take effect, Hofrichter said, compliance costs could be sizable. "It's one of those bureaucratic things that sounds easy," but compiling the data across payroll systems, especially when dealing with different currencies for multinational companies, "is a humongous task," he said.

Not everyone saw salary raises in 2016. Netflix’s Hastings took a salary cut in 2016 -- $900,000 compared with $1.1 million in 2015 and nearly $3 million in 2014. The company in its proxy statement said it determines an allocatable compensation for top executives and then lets them decide how much is allocated into salary, stock options and performance-based bonuses. The company’s compensation committee said in 2016 it decided to cap salaries at $1 million.