A special Thursday morning meeting saw Warner Bros. Discovery shareholders vote down an extraordinary payout for David Zaslav, even as they approved the merger with Paramount, that will trigger the windfall of up to $886 million for the CEO if and when it closes.
The precise vote tally was not announced after the brief virtual meeting but will be released in an SEC filing later today or Friday.
Unfortunately, shareholder votes on pay are non-binding, meaning they can’t be enforced.
In this case, it’s a package that leading proxy advisory firm Institutional Shareholder Services said is “inconsistent with common market practice” and called “extraordinary” and “one of the highest golden parachute estimates ever observed.”
Glass Lewis, another big proxy advisor, deemed the payout “a considerable and unnecessary cost to shareholders” and one that “merits severe concern.”
Both firms strongly advised shareholders to reject the payout.
Advisory votes, while not binding, send a strong message and often push boards to engage with shareholders to avoid a repeat. Compensation committees register the discontent and can make tweaks the following year when the next round of pay is set and another vote comes around.
That’s in the case of annual shareholder meetings. If the merger closes in the third quarter, as Paramount CEO David Ellison anticipates, Zaslav would sail out of the CEO job with yet another massive chunk of change for an executive who has been one of the highest compensated in media, and often across sectors, for years.
Taking a closer look at his package, as Deadline has reported, the bulk is equity valued at $517.2 million. Add to that $34.2 million in in cash severance and perquisites valued at $44.2 million.
What really surprised the rather unflappable ISS and Glass Lewis was a tax reimbursement of $334 million that swells the total payout to $886 million. The so-called “tax gross up” is to cover Zaslav’s tax hit on the severance package.
“As a general principle executives, like all employees, should themselves shoulder all taxes associated with any bonuses and benefits they receive,” wrote Glass Lewis. It noted that WBD only added the tax reimbursement agreement with Zaslav on March 10 of this year. The Paramount deal was announced Feb, 27.
One of the board’s rational was that that Zaslav’s tax exposure was riskier under the Paramount deal than it had been in a previous agreement with Netflix, something they rectified. They also said the cost would ultimately arise post-merger and be borne by the new combined company. The amount of the tax adjustment may vary based on the timing of the transaction.
It’s also okay to add $115.7 in stock options that have vested to the payout. And also to recall that Zaslav in early March sold stock worth $114 million.
More to come
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