Viacom's Fuzzy Picture on CEO Dauman's Pay

 | Jan 25, 2016 | 2:31 PM EST  | Comments
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My firm released a 99-page presentation this week on how Viacom has floundered with poor management over the past decade, as well as why that needs to change and the potential upside if it does.

One area we criticized deeply was executive compensation. Viacom's top two executive officers have made more money over the past five years than any other top two execs at any other media company. More upsetting for shareholders is that Viacom's stock price has basically been flat over that time period.

The company's initial reaction to the release Tuesday of our report was to say that it's always concerned about long-term shareholders.

But then Viacom issued a press release Wednesday that read in part: "President and Chief Executive Officer Philippe Dauman's bonus declined 30% to $14 million in fiscal 2015, versus $20 million in the prior year and his contractually provided salary and annual equity award were substantially unchanged.

"Mr. Dauman received a salary of $4 million in fiscal 2015, versus a salary of $3.9 million in fiscal 2014, and an annual equity award valued at $18.9 million in fiscal 2015, compared with an annual equity award valued at $19.9 million in fiscal 2014," the release added.

It was an oddly worded statement. From the first sentence, you would think that the CEO's pay went down in 2015 compared to 2014. That seems appropriate since the stock basically lost half of its value during 2015. A 30% pay cut isn't the same as 50%, but at least it's something.

However, as you read on, you see that Dauman continued to be paid his salary and an annual equity award, which were "contractually provided."

When you added all the numbers up in the press release, you realized that Dauman got paid $36.9 million last year. That's 16% less than the $44 million he made in 2014 ($44 million). But Dauman's target annual compensation is $40 million, so he only was 7.5% below that.

Why did Viacom issue this press release on Wednesday? Were they trying to get ahead of the issue? Were they proud of what they paid Dauman and wanted to brag about it to shareholders? It's unclear.

But then Viacom released its proxy statement for the year at 5 p.m. ET Friday with full compensation details. There was all kinds of extra information in that statement.

It turns out that Viacom paid its top five executives a combined $85 million in total compensation last year. Dauman had $220,000 in corporate jet usage last year. The proxy statement also showed that the CEO's 2015 compensation, although less than his 2014 comp, was higher than his 2013 payout. It didn't seem like all that bad of a payday for him given Viacom's disastrous 2015 stock performance.

And then a little after 7 p.m. ET on Friday, Bloomberg reported that Dauman's pay last year was actually $54.2 million rather than $36.9 million. The difference is due to a $17 million payment "that wasn't mentioned in a company press release this week," Bloomberg said.

Come again?

According to Bloomberg, Viacom told the news service in an e-mail: "The previously-disclosed discrete equity award associated with the extension of his employment agreement is presented as a lump sum in our proxy, but will not vest to Mr. Dauman until 2017, 2018 and 2019 and the ultimate value of the award will depend on the stock price at vesting."

So, instead of a pay decrease in 2015 when Viacom's stock price fell by some 50%, Dauman's pay actually increased roughly 23% year over year.

That's shocking for Viacom shareholders. It certainly appears as if the company was doing everything it could to cloud this payment and make it appear that Dauman's pay went down. Didn't they think anyone would notice?

Should this kind of behavior be allowed, where companies issue vague press releases early in the week, dump their proxy at 5 p.m. on a Friday and still apparently take a significant CEO payment out of the total-compensation section?

To my firm, this is just the latest sign that Viacom's leadership needs substantial changes to finally drive the company's stock price higher.

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