Remember when Jeffrey Katzenberg, then at Disney, wrote that provocative memo suggesting that the costs of making movies ought to be reined in? The idea resonated, got a lot of ink and was the subject of many a panel.
And as these things often go, the cost of making movies inexorably continued to rise over the subsequent 15 years.
Now one might wonder if another inexorable rise might be stemmed. I’m not talking about the cost of movie production but of the pay that goes to the very top execs at the media congloms.
Their compensation — like that of their confreres across all U.S. business sectors — is rising disproportionately to that of their employees.
Now the SEC is looking into how to improve the disclosure of exec pay — meaning it wants companies to be obliged to spell out not just salaries and bonuses but various perquisites, stock options or grants and retirement benefits.
The Wall Street Journal last week cited a Harvard-Cornell study which suggested that from 1999 to 2003, the five top dogs at each of the 1,500 largest publicly quoted firms (including Hollywood’s finest) cumulatively took $122 billion in salary, stock and bonus compared with $68 billion in the preceding five-year span.
In the period 2001-2003, top-exec compensation amounted to 10% of the companies’ net income, almost double the percentage of 10 years earlier.
There is often a disconnect between the financial performance of a company and the payouts to those who lead it.
Amid the ups and downs of the movie biz, when’s the last time a top exec got dinged because of poor performance? (Sure, execs get the axe from time to time, but they usually exit with a golden parachute.)
One top exec — not in the media — did get national attention in December when he wrote to the chairman of his compensation committee requesting a lower salary and bonus package. Few so far have followed the example of Riskmetrics CEO Ethan Berman.
To their credit, most media congloms have in the wake of Enron further diversified their boards, with fewer members beholden to the CEO or chairman and hence, in theory, more independent in setting compensation and making other decisions.
But whether or not shareholders will ever protest this disparity in paydays — or even consider that it is a disparity — remains to be seen.
So far, other than Disney activists barking at Eisner or maverick corporate raider Carl Icahn egging on change at Time Warner, they largely haven’t — even though most of the media conglom stocks have stubbornly underperformed for the last few years.
After all, they’ve invested in the Hollywood dream machine, which itself is oiled by the star system. Who’s going to say Leslie Moonves, Peter Chernin and others of their stature aren’t as valuable properties as Tom Cruise or Tom Hanks?