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'07 golden for CBS' Moonves

The CEO gets a 28% pay increase as ratings and ad sales plunge.

April 12, 2008|Meg James | Times Staff Writer

At a time when corporate chieftains are coming under fire for their outsize pay packages, here's another to add to the list: Leslie Moonves.

The CBS Corp. chief executive, whose network is suffering from ratings and ad declines, got a 28% boost in total compensation in 2007 to $36.8 million, outstripping peers at Time Warner, Walt Disney and News Corp., all of which are much bigger companies.

Moonves, 58, joins a club of top-tier CEOs whose personal incomes are drawing scrutiny while the economy is worsening and the performance of their companies is slackening. Disclosure of Moonves' pay package, in a proxy filing Friday with the Securities and Exchange Commission, also comes as the company is laying off employees.

"That goes against the trend. We are seeing no increases and even reductions in salary," said James F. Reda, a New York-based consultant on executive compensation. "To have a 28% increase is really unusual."

In 2007, Moonves collected $5.3 million in salary and $18.5 million in cash bonuses. He also received more than $12.5 million in stock and option awards, according to the proxy. Of that, nearly $4.5 million were stock awards made before 2007. In 2006, he earned $28.6 million in salary, stock and bonuses.

The disclosure comes at an awkward time for CBS, which has been pummeled by steep declines in prime-time television ratings and softness in advertising sales at its radio and TV stations. CBS revenue declined 2% in 2007 to $14 billion, and net income fell 24% to $1.25 billion.

CBS shares, meanwhile, fell 21% from their peak in July 2007 to the end of the year, and have tumbled another 21% since January.

To shave costs, CBS last week laid off more than 160 news anchors, reporters and technicians from its TV stations across the country. The move followed cuts last year in the radio division. And earlier this week it was revealed that CBS executives discussed a possible early exit for news anchor Katie Couric, whose highly promoted hiring at "CBS Evening News" has been a major disappointment both commercially and critically.

On top of that, Moonves just moved CBS' top West Coast executives from their longtime home at Television City in the Fairfax district into lavish, multimillion-dollar offices in Studio City.

Dan Pedrotty, director of investment for the AFL-CIO, said Moonves' pay reflected the chasm in compensation between CEOs and their rank-and-file workers.

"There is one set of rules for the working class of America and a different set of rules that apply in the corporate boardrooms," Pedrotty said. "Why would someone deserve an $8-million raise when the performance of the company has gone down?"

In the proxy, CBS explained the increases, saying that the company raised its dividend payment to stockholders by 25% to 25 cents. It also exceeded its targets for operating income and free cash flow.

Meanwhile, when the CBS board renegotiated Moonves' contract in October, it changed the mix of cash and equity it paid him. That still left 10 months of the year under the older formula, which carried a higher base salary.

The company's fortunes have slid this year, particularly during the first quarter when network prime-time ratings plunged 23%, in large part because of the writers strike. CBS had to rely on reruns of its most popular dramas and comedies to fill air time. With the strike over, the network has returned to original episodes and its ratings are expected to improve.

In a statement, CBS said that Moonves' future earnings might not be so high.

"The new deal lowered Mr. Moonves' cash salary and bonus target and shifted the vast majority of his pay into stock options that will have no value unless the stock price exceeds $28.70, and into stock awards which will not vest unless CBS meets objective financial criteria," the company said.

"A significant portion of his reported compensation in 2007 is related to stock that was given to him in past years and was required to be reported this year, as well as some overlapping reporting of stock-based compensation from his old deal and new deal," the company added. It noted that his bonus and salary payments were lower in 2007 than in 2006.

However, Reda said that CBS' statement that Moonves' compensation next year would likely be less "raises all sorts of red flags."

"That's just silly to try to explain it away by saying that something that might happen in the future will, in hindsight, make this not look so bad," Reda said.


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