Hollywood’s Compensation Landscape Shifts with Executive Pay Revisions.
In the wave of CEO compensation declarations via regulatory filings in 2023, a notable focus was on the misalignment of timing and the controversial nature of these announcements. The year commenced with Apple revealing that CEO Tim Cook had volunteered for a salary reduction post a decrease in shareholder approval for his pay. Following suit, Netflix, on December 8, made public alterations to its executive compensation framework, a move perceived as a response to the June rejection by shareholders of top executive pay packages amid the Writers Guild of America strike.
The question now lingers if other major Hollywood corporations will follow suit in 2024 to revise their pay strategies.
While it’s tempting to view Apple and Netflix’s adjustments as isolated incidents, there’s a broader call from Wall Street and others for companies to be more shareholder-oriented. In a striking move in November, AMC Theatres’ shareholders disapproved of the executive pay proposals, spotlighting the $23.7 million income of CEO Adam Aron in 2022.
The CEO compensation announcements of 2023 were marked by their inopportune timing—coinciding with industry strikes—and the stark contrast between executive earnings and industry layoffs across companies like Disney, Paramount, and Warner Bros. Discovery, leading to widespread criticism from industry insiders and shareholders.
Traditionally, companies like Disney and Apple announce their executive compensations toward the year’s end or early in the next, aligning with their fiscal calendar endings. However, the momentum generally picks up around March and April for most companies. Netflix, which typically outlines its compensation details for the preceding year around this time, faced a significant rebuke with its 2022 pay packages being rejected by shareholders in a 3-to-1 vote. This prompted Netflix to promise significant alterations to its long-standing compensation model in October, indicating a shift toward a more traditional structure.
December 8 saw Netflix announcing its 2024 executive compensation targets, including substantial packages for its co-CEOs but with a structure intended to address shareholder concerns, featuring a combination of salary, performance-based bonuses, and stock units.
In early 2023, Apple disclosed a significant cut in Tim Cook’s total compensation, reducing it by more than 40 percent following a dip in shareholder support during an advisory vote. This move was part of a larger strategy to strengthen the performance-related aspect of executive compensation, adjusting the proportion of restricted stock units linked to company performance.
This trend of scrutinizing and potentially adjusting executive pay isn’t isolated to Netflix and Apple. It reflects a broader movement within corporate America, where companies are being encouraged to engage more with shareholders and address their concerns to gain better support for compensation strategies. As noted by ISS Corporate Solutions in a 2022 report, companies might face continued low support for executive pay if they don’t actively engage with and address shareholder concerns.
Recent voting patterns across Hollywood and tech companies underscore this point, with varying levels of shareholder support reflecting the scrutiny over executive compensation. While some companies show high approval ratings, others hover closer to the threshold of low support.
Courtney Yu of Equilar notes a trend towards more performance-based compensation across industries, including media and entertainment, indicating a shift in how companies are structuring executive pay to align more closely with performance and shareholder interests. The evolution of “Say on Pay” since its introduction in 2011 has seen companies progressively adapt their compensation strategies to meet shareholder expectations, with a notable shift towards performance-based equity.
In summary, as Hollywood and corporate America at large enter a new era of executive compensation, the focus is increasingly on aligning pay with performance and shareholder expectations, a trend that’s likely to continue shaping the industry’s approach to executive remuneration.
