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TW opts for options

Exex got stock deals rather than raises in '96

NEW YORK — Time Warner Inc. awarded its top execs a bunch of new stock options, but no pay raises in 1996, despite what the entertainment giant considered to be “major strategic and financial accomplishments” during the year, it said in its annual shareholder proxy statement released Friday.

New vice chairman Ted Turner, already by far the biggest shareholder in the company, led the exec option grants with 1.3 million options valued at $17.4 million, while chairman Gerald Levin was granted only 350,000 worth $4.7 million. Levin already has 2.4 million options granted in the past, although the latest batch was the first grant he has received in three years.

Levin payday steady

Levin’s bonus was kept at $4 million (in addition to salary of $1.05 million), the same he has been paid since 1994. TW president Richard Parsons was paid a $2 million bonus, flat with 1995, although his salary rose 9% to $900,000. Executive VP Peter Haje also had his bonus kept flat with 1995 at $1 million.

While proxy statements are written in highly diplomatic prose, the board’s decision to grant new options while keeping a lid on exec bonuses appears to be in response to Time Warner’s poor stock price performance. Time Warner uses a complicated formula to calculate the long-term value of the options for the proxy, but in reality the options currently have no value and won’t in the future unless the stock price rises.

Half of Levin’s new grant can be exercised at $42.63 and the other half at $53.29 or higher compared with TW’s closing price Friday of $42.75. Half of Turner’s options can be exercised at $41.25 but the rest can’t be exercised until the price hits $51.56 or higher.

The stock price — which is trading currently about where it was this time last year despite a boom in the broader stock market — was one of the factors used by the board’s compensation committee when it calculated exec bonuses, the proxy said.

Stock price a big issue

The board clearly views the stock price as a major issue because it outweighed the company’s accomplishments “both on a company-wide basis and at its operating levels” last year, which had a “significant impact” on the assessment of bonuses in addition to factors like the stock price performance. These accomplishments included the successful completion of the TBS acquisition, overcoming “regulatory and litigation hurdles,” starting a cost-cutting program and meeting cash flow goals.

Turner earned a salary of $235,246 and a bonus of $1 million for the three months he was a TW employee (following TW’s acquisition of Turner Broadcasting System Oct. 10, 1996), although his annual salary is the same as Levin’s $1.05 million. The proxy noted that Turner earned $1.04 million in salary and bonus from TBS in the nine months before the merger.

Turner, who owns 61 million Time Warner shares as a result of the sale of his TBS interest in the merger, is entitled to another 1.2 million stock options which will be granted over the next four years, the proxy said.

The proxy scheduled the company’s annual shareholder meeting for May 15. The main item on the agenda is the company’s proposal for putting the entire board up for re-election every year instead of the current system, which staggers the board election over a three-year period.

Time Warner said in the proxy that it believed the old system had “served the company well but is no longer desirable.” It said the board “has come to believe that stockholders should have the opportunity to vote on the performance of the board collectively and each director individually.”

If the proposal is adopted, as is likely, all the directors would face re-election in 1998, one to two years earlier than would be the case otherwise.

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