The vast majority of the windfall comes from more than $144 million in stock awards that Zaslav received after setting a new six-year employment contract last year.
In fairness, those awards will vest over time, which means that Zaslav did not actually command a $156.1 million paycheck. SEC rules mandate that Discovery record the entire value of stock awards to be doled out over the six-year contract in the first year that they are granted. Zaslav’s paydays in the coming years will be far lower. In 2013, Zaslav received $33 million, with $22.5 million coming from stock awards.
The stock awards are largely tied to the company’s performance during the next six years. That means his actual haul could wind up being nothing if Discovery’s stock falls below pre-determined targets, or it could be worth more, if the share price exceeds those benchmarks.
Nonetheless, the symbolism of a nine-figure payday in a single year is sure to stir outrage and debate among corporate watchdogs and governance experts.
In the filing, Discovery emphasized Zaslav’s track record in expanding the company’s operations and diversifying its international portfolio since he signed on as CEO in 2007. The company’s market cap has soared from $5 billion when he joined to $20 billion in 2014.
“This contract rewards Mr. Zaslav for the value he has created and the continued strategic direction he provides and requires sustained performance over time for that award to have value,” the filing states. “At the end of his contract, Mr. Zaslav will own a substantial amount of equity of Discovery, which reinforces his alignment with our shareholders and encourages long-term ownership of our stock.”
The new contract also has clauses designed to ensure that Zaslav has incentive to remain at the helm through the term of the deal. He has to hold on to 60% of his Discovery stock through the contract that runs through the end of 2019. He also has to use 35% of the cash proceeds from any stock sales to buy more Discovery shares.
Zaslav’s base salary is set at $3 million for the six-year term of the contract. His potential cash bonus will be limited to a maximum of $6.6 million for the next few years, increasing to $9 million in the final two years of the deal.
Zaslav is likely to wind up as one of the largest individual shareholders in Discovery by the time his contract is up. And he could become the single most powerful shareholder under a deal that Zaslav struck last year with John Malone, the cable mogul who has long had a sizable stake in Discovery Communications.
Zaslav has the right of first refusal to buy Malone’s preferred shares that give him 28.7% of the voting rights in Discovery — should Malone decided to sell. Malone (as an individual, not through Liberty Media) and Advance/Newhouse Communications, which controls 24.9% of voting shares, have been the dominant shareholders in Discovery for most of its 30-year history.
Zaslav’s stock-inflated pay packet is big, but it’s still not as big as the $384 million stock grant that Apple CEO Tim Cook received in 2011 when the company was eager to keep him in place following the death of Steve Jobs.