David M. Zaslav, chief executive of Discovery Communications, topped the local list of the highest-paid executives with $42.6 million in total compensation in 2010, according to data filed with the Securities and Exchange Commission. That represented a 264 percent increase from 2009.
The bulk of Zaslav’s pay, about 84 percent, was derived from stock and option awards, or equity pay, aligned with the growth of Discovery’s stock. Shares of the Silver Spring-based cable programming giant traded as low as $14 in 2009, but hovered around $42 per share by the close of last year. Profit in 2010 also climbed 19 percent year over year to $653 million.
Discovery, which declined to comment for this story, cited Zaslav’s accomplishments in its proxy statement, including his “success in driving quality content . . . and strong advertising sales that outperformed other major cable groups.”
For Zaslav to receive the full amount of his $20.3 million stock award, he must meet set performance goals before the award vests in 2013. That’s not unusual. Stocks and bonuses at many companies these days come with performance targets, said Charlie Tharp, executive vice president for policy at the Center on Executive Compensation.
“Giving long-term awards is more reflective of the scope of decision-making,” he said. Corporations also want to ensure “senior executives are aligned with the interest of shareholders. The best way to do that is to give a large portion of the pay in equity.”
Some payouts are not guaranteed
Executives often have to wait several years before cashing in options, with or without performance tie-ins, but the face value of the awards can soar — or plummet — by that time.
“CEOs have been able to profit from stock market fluctuations,” said Brandon Rees, deputy director of the AFL-CIO’s office of investment. “The stock options they received in 2008 have allowed many CEOs to profit for simply getting share prices back up to where they were, whereas long-term investors have not seen significant share price appreciation.”
More companies are starting to require C-suite executives to own a substantial amount of the equity they receive, a measure supporters believe mitigates risky behavior by aligning an executive’s potential payout with shareholders.
Option awards locally shot up 41 percent year over year in 2010, while stock grants rose 12.6 percent, according to a study conducted for Capital Business by Equilar, an executive compensation research firm. Salaries climbed a smaller 4.3 percent, though bonuses surged 19.2 percent.