There’s a rebellion brewing around the world against what The Economist labels “the corporate gravy train” of executive compensation, but Hollywood until now has managed to elude the rebels. That may soon be changing.
New legislation as well as new SEC rules could force studios and networks for the first time to disclose the paychecks of senior executives and star dealmakers — disclosures that may fuel further resentment in the creative community over the shrinking salaries being allotted to actors, writers and other artisans.
“I keep explaining to my clients that they have to lower their expectations,” one senior TV agent told me last week, “but some of the corporate guys who are crunching me just got pay raises.”
The SEC plans to propose rules requiring companies to reveal details about the pay of middle-management executives — not just the top five — and Sen. Charles Schumer introduced a bill recently that would not only force more transparency on pay but would also require shareholder voting on executive compensation.
All this reflects a worldwide movement to clamp down on corporate perks stemming from the realization that, in many cases, the structure of executive compensation plans has encouraged irresponsible risk-taking, especially in the financial sector. Given their equity-based bonus plans, top bankers were motivated to launch potentially catastrophic initiatives even if their companies ended up in TARP hell.
No direct parallel exists in the entertainment industry, but some Wall Streeters worry about what is arguably an imbalance between performance and compensation. Companies in the entertainment sector have taken a battering both in terms of earnings and stock prices, but the pay levels of some top executives have attracted wide attention: The total compensation packages of three of the industry’s top execs — Bob Iger of Disney, Les Moonves of CBS and Peter Chernin, the now-departed chief operating officer of News Corp. — hovered around $30 million each last year , and Chase Carey’s return looks to bring him a payday commensurate with Chernin’s.
One agent who represents mainly filmmakers asks: “If the studio guys are still making the big bucks, why are my clients being compromised?”
These comments are reflective of a sort of unspoken class warfare that has broken out in Hollywood. There’s a mounting sense that the global conglomerates are rewriting the values of the talent business and that talent is the loser.
Hollywood’s battles are minor, however, relative to the global outrage against corporate greed that is resulting in the firing of top corporate hierarchs. In France a fat payoff to a departing auto executive produced a public rebuke from France’s prime minister, Francois Fillon, who said compensation policies “put our entire economic system at risk.” The Economist reports that a majority of shareholders of Royal Dutch Shell surprisingly rejected a pay deal for the company’s senior executives.
Warren Buffet last month denounced the system whereby chief executives are allowed to choose members of their compensation committees and came out in favor of “say on pay” policies for shareholders.
Mary Schapiro, the new SEC chairman, is leading the government inquiry into corporate pay structures that may require more data beyond just the five highest paid execs. The Wall Street Journal noted that movie studios as well as financial firms could be impacted because they all have “superstar” traders or dealmakers whose pay far exceeds normal executive pay.
The theme underlying all this: It is clearly crunch time around the world, and even corporate hierarchs may no longer be immune.