Board rewards him for Street's confidence
NEW YORK — After enjoying stronger profits and a dramatic rally on Wall Street over the past year, Time Warner Inc.’s board showed its appreciation by awarding chairman Gerald Levin a 62% higher bonus of $6.5 million and a four-year extension of his employment contract to the end of 2003, it revealed Wednesday in an SEC filing.
The bonus increase came after four years of flat bonuses, when Time Warner had been struggling with restructuring efforts and a stagnant stock price. With salary thrown in, Levin earned a total of $7.55 million in 1997.
Levin also is getting a salary increase for the first time since 1990. His new contract, which replaces one due to expire Jan. 10, 2000, increases his annual salary from $1.05 million to $1.5 million, although half of the salary is deferred until after he leaves the company (as is now common for senior corporate execs).
Additionally, Levin got a bunch of new stock options, on top of options he already has which are now worth $80 million, Time Warner said in its proxy statement for its upcoming annual meeting of shareholders.
All top senior execs were paid higher bonuses. TW vice chairman Ted Turner was paid $5 million in what was his first full year at the entertainment giant, while president Richard Parsons took away a 37% higher bonus of $2.75 million.
The financial largesse followed a turnaround in investor sentiment toward Time Warner, as improved earnings throughout most of the company combined with a return to favor of cable stocks lifted TW stock from below $40 early last year to the current price of around $75. Time Warner stock fell 87¢ to $74.43 Wednesday amid a general market sell-off.
The proxy highlighted how much more confident some institutional investors feel with Time Warner. It revealed that Fidelity Investments, one of the biggest money management firms in the U.S., became a 6.9% shareholder in 1997 while the biggest institutional holder, Capital Group, lifted its stake from 9.2% to 10.6%.
The compensation committee of the board, which is made up of five outside directors, said in their report that their philosophy for exec pay “has not changed. What did change in 1997 was the accomplishment of certain strategic and financial milestones and the investment community’s recognition of those accomplishments.”
These included achievement of budgeted earnings targets “at almost all divisions” and record earnings “on a company wide basis.” At the same time net debt fell $850 million, a cost savings plan was put into effect “that realized more than $150 million in savings in 1997 and is expected to continue in 1998 and beyond at even greater amounts.”
The company also “established a cross-divisional, collaborative, long-term business plan” that focuses on financial returns and cost control.
As part of his new contract, Levin was granted 350,000 performance-based stock options which can only be exercised if Time Warner’s stock price doubles to $144.12 within five years. Levin was granted another 350,000 stock options in line with the company’s regular employment option grant scheme.
Levin finished 1997 with 2.5 million options able to be exercised and 583,332 other options. The value of the options which can be exercised now was $80.7 million at Dec. 31, although they would be more valuable now — since Jan. 1 Time Warner’s stock price has risen 20%.
Also highlighting the degree of shareholder satisfaction with the company was the absence of any shareholder resolutions before the annual meeting, scheduled for May 14 in Atlanta.