The estate of Steven J. Ross will get millions of dollars including the late Time Warner Inc. chairman’s salary for the next three years under terms of his contract with the media and entertainment company.
The value of the compensation and death benefits package cannot be calculated precisely because it depends on the company’s financial performance over the next few years and how well Time Warner stock does.
But the Wall Street Journal said in yesterday’s editions that the contract will result in payments to Ross’ estate of at least $ 300 million.
Ross, who died Sunday after a long bout with prostate cancer, built Warner Communications Inc. into an entertainment powerhouse over more than three decades and engineered its merger with Time Inc. that was completed three years ago.
The company is now the world’s biggest media and entertainment concern with interests in publishing, film and TV production, music and cable TV systems.
TW announced a further foray into publishing, in which it will assume management responsibility for most of American Express Publishing Corp.’s operations, including its core magazines, Travel & Leisure and Food & Wine. It will receive an undisclosed annual fee as well as incentives for improving the profits of the publishing unit.
The company’s contract with Ross, who became its chairman and co-chief executive, has been a focal point for critics who say corporate executives are often paid far too much. Ross defended his contract by saying it was his fair reward for years of effort in building Warner.
Compensation expert Graef Crystal said Ross got generous concessions few other executives could command.
Like many other executives, Time Warner maintained a life insurance contract on Ross and will share proceeds of that with the estate. The company was required to maintain life insurance of $ 7.5 million on Ross.
But Ross’ contract also provided that his estate will be entitled to his salary and bonus for three years after his death and any deferred compensation.
Ross was paid an $ 800,000 salary last year. His annual bonus is set at 0.4% of the company’s pre-tax profit and the Journal said it amounted to $ 2.9 million in 1991.
Crystal said the extended salary and bonus payments are unusual, and he estimated that the bonus could be worth between $ 4 million and $ 5 million a year because the company’s operating performance should improve with the economy and as corporate debt is reduced.
Ross also was paid from a trust established at the time of the merger and valued at about $ 196 million in 1990. His 1990 pay included about $ 74 million from that fund and the rest was to be paid with any invested interest through 1997.
But the most valuable portion of the contract may be the stock options that Ross received in 1990.
After adjustment for a stock split earlier this year, Ross had options to buy 7.2 million shares at $ 37.50 a share anytime in the next nine years.