Discovery

Annual meeting: May 8, 2019

Once again this year, as it was when I first wrote about the company in 2015, David Zaslav’s total disclosed compensation is the highest of any S&P 500 company. This year’s package of $129 million includes an option award valued at $102 million.

At a time when most companies have dispensed with employment agreements, Discovery recently renewed Zaslav’s, which is now extended through 2023. The employment agreement guarantees excessive pay – including a base salary of $3 million – for the next several years.

The company has also moved from performance-based restricted units to simply time-based restricted stock. According to the board one factor behind this was tax law changes that took away preferential treatment for performance based awards. This tax policy is universal, however, and yet most companies are continuing to follow best practices and include performance-based requirements to equity awards.

As I outlined when I wrote about this company in 2016, Discovery has a complicated stock structure with Series A, B, and C common stock and series A and C preferred stock. Each share of Series B common stock – owned almost entirely by John Malone – gets ten votes. This entrenchment makes insulates both Zaslav and the board from shareholders.

There are three tranches of directors elected by difference combinations of stock. Directors are extremely well paid, each earning more than $275,000 for their service. Board members are paid extra for serving on committees and even more for chairing them, and the company notes that expenses for attending meetings including airfare will be reimbursed “whether by commercial aircraft or private plane.”

As with many companies, Discovery uses supplemental figures to portray the pay ratio in the least offensive light possible. What’s extraordinary at Discovery is that even with the company’s contortions the pay ratio is still over 400x. Here’s the language as disclosed in the proxy:

“The ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees is 1,511 to 1. Mr. Zaslav was awarded a one-time grant of stock options in 2018 in connection with the Zaslav 2018 Employment Agreement. Without the value of this initial grant, Mr. Zaslav’s annual total compensation would have been $35,509,188. Based on this recalculated total the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees would have been 414 to 1.”