I read with interest the compensation package given to the CEO for Discovery Communications. The man took him a little under $50 million. Iger, I believe, took home roughly $40 million. So, my question is, should Disney have paid its CEO more? Personally, I think both individuals should have made much less. But I know I tend to be in the minority on that count, so, given that DISCB has a smaller market cap than Disney, and that Disney arguably is more difficult to run, I have to admit to some curiosity as to what those who think Iger is worth the money believe when given this comparison. If we paid Iger $60 million compared to DISCB's $50 million-CEO, a number that would not economically kill the Mouse, would we have gotten even better performance out of the stock?
We are paying him what they agreed upon, so clearly neither he nor the Board thought he should get more. FuskieWho notes that the referendum supporting the executive compensation passed by about 57%, so a majority of shareholders are also satisfied with the amount Iger is getting paid...
Note: In my above post I meant to write "The man took in..." instead of the "The man took him...".Fuskie, I was more curious as to what people themselves thought. You are correct in that the board pays him what it thinks it should. But if you were in charge, would you think it reasonable to pay him more? Les Moonves over at CBS earned more than Iger (if I recall correctly). The Viacom CEO I believe has earned more in some years than Iger. Most are very happy with the Disney CEO's performance and believe he has been worth the money. But is there a point where he isn't? If those other media companies are paying their CEOs more, are they wrong? If so, why? Another hypothetical: Should the company negotiate with him to forget leaving and stay on board until 2020? If the board said they would pay him a bonus irrespective of his regular compensation of say $70 million just to sign, would you be for that? Why?
I think compensation envy is what has improperly driven up executive salaries, as well as sports contracts for athletes earning way beyond the real value of their talents. These costs just get passed on to the consumer. Does a film get its creativity trimmed in order to ensure there is cash to cover Iger's salary? Does a scene get cut from an attraction because the budget is restricted? Is the money that would have funded the successful LucasArts being redirected to cover bonuses? The bottom line question is do I get more value giving that money to Iger or putting it to work elsewhere in the company?Fuskie Who actually did vote in favor on the executive compensation referendum because I think Iger has successfully navigated the company though the recession and aggressively positioned it for a strong future, but as a general rule, I don't think most CEOs are worth what they are paid and I wouldn't mind seeing Iger make less and more spent on brand building and generating consumer revenue?..
Very interesting comment, Fuskie. And the comparison to sports players has always been interesting to me. In a sense, they possess objective talents while I would argue those in creative fields, such as Iger, possess subjective talents and that these talents, even if they are high in an individual, are replicated in a plethora of alternative human resources in any given population. Objectively, a sports team seems to make more money if it is winning. To win, physically talented people must be employed. A movie, or a park ride, however, doesn't win or lose necessarily...it might be a loss leader for some other part of the company, it might generate an acceptable ROI over time, etc. I don't know if a scene got cut because of Iger's compensation, probably didn't, but I do know if we paid him $2 million in total compensation (and I mean total, down to all the perks, or what would be left if I were in charge) there would be money left over to fund some extra bets. But I think this is an interesting exercise for shareholders who are happy with Iger's compensation, looking at it relative to others who are in his same field but arguably manage less complex entities. If they don't think more money is needed to get Disney's stock price higher, what would the effect of less money be? And the situation is more complex because checking some charts I think some of the other stocks have done better (but double-check me on that, especially in terms of dividends).
I think executives are generally overpaid for the value that they bring to a publicly traded company. I doubt raising Iger's pay to $60M would make the company run one whit better. He has done a good job in my estimation so I would not press for a pay cut, but I'm not going to approve a raise either.
I found Fuskie's comparison to the pay of sport athletes interesting and at first totally disagreed with it when compared to CEO's. However, upon further thought I must admit comparing them makes sense. IMO they are both overpaid greatly because of breakdowns in Capitalism that allow little Oligiopolis and big brother networks to exist.CEO's are vastly overpaid because there are no really owners monitoring their pay. Almost all big companies are owned mostly by retirement and pension funds that just buy and sell stock not in the ownership business thus the people running the company only deal with the BODs. The BODs is for the most part made up of ex-CEOs and so they are happy to keep raising and raising their salaries despite nothing economically happening in the company or country to explain the need for such raises in salary. It's a rediculous country club and the cost is absurd.Now with athletes in Major Sports it is a little different. In fact you can argue that top athletes in basketball because of a salary cap and max salary clause are underpaid. There is plenty of economic data to prove this. However, where is the money coming from to pay these high salaries. It is coming from TV rights. And where is the money for the TV rights coming from? Well companies like ESPN bid whatever amount of money it takes to get the right to televise a crucial sport. Well how do they make money bidding whatever it takes. Because they then charge the cable company xxxx amount per consumer and make them pay that amount even for cable company conusmers who don't watch ESPN. What if the cable companies don't pay? No basketball or football for their customers who care which leads to switching companies and in the case of Disney no Disney Channel, ABC, ABC Family, etc to boot.The money is getting crazy: Every cable viewer pays over $5.15 a month to watch ESPN. In LA every consumer pays $4.00 a month just to watch the Lakers and soon close to $6.00 a month to watch the Dodgers.Your choice is get rid of cable/satellite or pay the fee. Too bad if you don't like or care for the channels.In a real capalist market imo each channel should have to stand on its own and price be driven by what viewers of the channel are willing to pay. I can even go with companies that own multiple channels being allowed to bundle (although really shouldn't be mandatory) but for example to say I have to buy Fox's channels so I can watch Disney's channels seems as unAmerican as it gets.Moe
I doubt raising Iger's pay to $60M would make the company run one whit better.I bet if his pay got cut to $20 mil he would do just as good a job. Probably wouldn't be able to get a better one and if he did we would be able to find someone one step down making one tenth the salary now that would do a great job for the $20 mil.This is not a cause of economic supply and demand that is causing these salaries to be so high.Moe
"I don't know if a scene got cut because of Iger's compensation, probably didn't, but I do know if we paid him $2 million in total compensation (and I mean total, down to all the perks, or what would be left if I were in charge) there would be money left over to fund some extra bets."I know that attractions have lost creative elements due to budget shortfalls of as little as $100,000 (and less). So that kind of compensation is capable of having a potential negative effect on creative projects.
Your choice is get rid of cable/satellite or pay the fee. Too bad if you don't like or care for the channels.I am old enough to remember when the only way I could see a Dodger game was to go to the stadium. Gas + parking + ticket + Dodger dog... You get the idea... It was expensive. $6 a month seems like a bargain to this old man!What bothers me is the guaranteed money in sports. I know something like this would never happen, but what if some Asian country, like North Korea, decided to drop a nuclear bomb on its nearest neighbor (and I am not thinking about China. That would be impossible, correct?). LOLMy point is this: There are events that could put the world in distress. Sports and other guarantees are so large that an economic slowdown of major proportions could threaten companies (probably not Disney), cities, and states.ESPN is not the massive growth and profit engine of Disney without spending big dollars. The amounts being guaranteed are, like in the case of the ACC, through 2027. Here is what the NFL, the most expensive sport, costs the broadcasters:Currently, the terrestrial television networks CBS ($3.73B), NBC ($3.6B) and Fox ($4.27B) — as well as cable television's ESPN ($8.8B) — are paying a combined total of US$20.4 billion to broadcast NFL games as per the current contract that ends in 2013. From 2014 to 2022, the same networks will pay $39.6 billion for the same broadcast rights.http://en.wikipedia.org/wiki/NFL_on_televisionRemember, these are annual fees. Here is what ESPN reported they are paying just for Monday Night Football:Earlier this season, the NFL and ESPN reached an eight-year extension to keep "Monday Night Football" on the cable channel through the 2021 season, increasing the rights fee from $1.1 to 1.9 billion annually.http://espn.go.com/nfl/story/_/id/7353238/nfl-re-ups-tv-pact...The NFL blacks-out local games when local stadiums fail to fill. The only way to see a Bucs game on TV in 2012 was to wait for away games. If an economic downturn hit stadiums across the US, would the broadcast rights be worth much if no local games were broadcast?Disney made $8.8 billion after taxes last year. A $2 billion contract for a single weekly time slot that runs for only 16 weeks will not tank Disney. But, the combination of contracts, do add up to really big money. In an economic collapse, a cruise ship will be hard to fill and they are really expensive to operate. People will forgo the trip to Orlando (or Paris)... You get the pictureFor those old enough, like me, to remember when Disney was in financial trouble, these contracts and $17.4 billion in debt are a reason for concern when the stock is priced for perfection. But, perfection (except in video and social games) is what Mr. Iger has delivered. I'll hate to see him go in 2014.W.D.
I know that attractions have lost creative elements due to budget shortfalls of as little as $100,000 (and less). So that kind of compensation is capable of having a potential negative effect on creative projects.I agree.But, there is no way to force a company to invest in intangibles. Is snow at the top of the Matterhorn ride track really necessary? I say yes. The CFO might see it as too expensive for the ridership.I think it is the intangibles that make people come back to a Disneyland when there is a Magic Mountain in their backyard. Disney, though, is doing projects that will have big impacts on intangibles. Being able to pre-schedule your ride sequence and times, and avoid lines, is something I am anxious to see. Sequencing traffic lights can have a big impact on travel times and traffic throughput. I think Disney will set the standard for what a theme park wait should be with its upcoming changes.W.D.
One more reference point, Scripps Networks paid their CEO Ken Lowe $14.2 million last year, a 47% increase over the prior year. They're much, much smaller than Disney or Discovery, with only six cable TV channels and some internet properties. (For comparison, SNI had $2.3 billion in revenue, $681 million in profit last year.)
What bothers me is the guaranteed money in sports. I know something like this would never happen, but what if some Asian country, like North Korea, decided to drop a nuclear bomb on its nearest neighbor (and I am not thinking about China. That would be impossible, correct?). LOL Oh for ESPN an atomic bomb can be very well only a few years away. As with all loopholes in Capitalism the greed over time just totally takes over and that is what is happening in sports TV.Knowing cable and satellites are held hostage every major network is starting their own ESPN competitor and of course asking cable companies for nice chuncks of money or their consumers will leave for the channel that shows those extra Olympics or NHL games or NASCAR races. Of course ESPN can keep those at bay.But now people are realizing in big local markets the same can be done just to watch the local teams. So in LA and I am sure other markets will follow the prices are escalating fast for channels that cover sport teams. And now each sport team is getting their own channel. So instead of cable viewers in LA for example getting hit with fees of $3.00 a month to see all their local teams on Fox Sports. It will be $4.00 a Month for TW Lakers, $5.00 for TW Dodgers, $1.50 for College Sports and we still have the Angels, Kings, Ducks and Clippers pulling new big deals on Fox.The result can easily lead to a consumer revolt where the FCC finally does what in my opinion they do years ago and start forcing some sort of ala Carte action or people to at least be able to not pay for sport channels if they aren't sports fans.If that happens what ESPN is doing is exactly the same as the mortgage companies buying up all those bad mortgages in the mortgage boom just because it looked like so much great quick money.Will be interesting to see what happens.Moe
But, there is no way to force a company to invest in intangibles. Is snow at the top of the Matterhorn ride track really necessary? I say yes. The CFO might see it as too expensive for the ridership.At Disney at the end of the Eisner era the answer yes was proven. Disneyland had started cutting corners and not keeping up on maintenance etc and its attendence was tumbling. Then they switched Presidents of Disneyland and the guy came in and just repainted and fixed everything. No new rides, no new e-tickets and attendence within a year starting going through the roof again and things have been booming in Anaheim ever since.Moe
One more reference point, Scripps Networks paid their CEO Ken Lowe $14.2 million last year, a 47% increase over the prior year. Yes and I am sure he did allot to disserve his 47% raise just like he did probably the 30-40% he has gotten the last few years.I don't think that anyone would argue that in the CEO's club Iger's pay is obscene compared other CEO's. It's not Iger's pay in particular that is broken its the whole system.As I like to say when I loophole in Capitalism is found "Greed takes over" until its closed by ensuring accountability and/or competition. In CEO pay today there is neither for almost any public company.Moe
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