Large Raises At Radio One
Hughes, Son Rewarded Despite Stock's Decline

By Anita Huslin
Washington Post Staff Writer
Saturday, April 26, 2008

Struggling media giant Radio One has agreed to give founder and chairman Cathy Hughes and her son, chief executive Alfred C. Liggins III, substantial raises and bonuses as part of new three-year pay packages.

Hughes's salary would increase at least 75 percent, from $427,800 to $750,000 a year, under the pact. She would be eligible for an annual bonus worth up to $250,000, according to an April 18 filing with the Securities and Exchange Commission.

Liggins would receive $980,000 in salary, a 70 percent increase over the $575,370 he made in 2007, and have the opportunity to match that in an annual bonus, contingent in part on the company meeting certain performance goals. He would be paid a $1 million "signing bonus" because, the Radio One compensation committee said, he has been underpaid for the last three years. Liggins also would be paid $4.8 million to compensate him for losses he incurred when he was forced to repay a company loan to buy Radio One stock several years ago.

Liggins received $1.1 million in total compensation in 2007; his mother received $602,252.

Some compensation experts questioned the new pay packages in light of the company's recent performance.

The value of Radio One stock has dropped more than 80 percent over the past year, and the company announced recently that it would sell its Los Angeles station, which operates in the nation's most lucrative radio market but has struggling to maintain market share.

Industrywide, broadcast companies' stock prices have posted double-digit losses as advertisers shifted their spending to other formats.

"This is a company where obviously performance is an issue," said Scott A. Fenn, managing director of policy at Proxy Governance, a Vienna proxy research and advisory firm. "When you look at what's happened to the stock, and pay over a three-year timeframe has been high, there are some red flags here as to whether this makes sense."

In its SEC filing, the company said the increased salaries and benefits were intended to reward performance and bring the compensation packages in line with the industry. Company officials did not respond to requests for comment.

"The compensation committee believes that entering into these agreements assists us in retaining our key officers for a certain period of time and focuses the officers' energies on our business," the filing said.

Final compensation decisions are to be made by the Radio One board, and salaries could be increased at its discretion, according to the employment agreements. The company is scheduled to hold a shareholders' meeting on May 28 to vote on retaining Hughes, Liggins and others on the board.

Under the terms of the employment agreements, if the company were sold and either Hughes or Liggins were terminated for any reason, they would get three times their base salary plus the average of their last three annual bonuses, and a pro-rated annual bonus in cash.

Under the three-year agreement, Hughes receives 150,000 shares of restricted stock and 600,000 options to buy shares, while Liggins receives 1.15 million stock options and 300,000 shares of stock, subject to vesting requirements and other restrictions. Liggins would also be eligible for a piece of the proceeds from what the agreement terms a "liquidity event" involving the company's TV One network.

Fred Moran, an analyst with the Stanford Group, called the compensation package "unique and out of the realm of normalcy."

"In this day and age of underperforming media stocks, to still vote yourself excessive compensation packages when your shareholders are still losing money seems egregious," Moran said.

Radio One's stock lost 17 percent of its value this week, closing yesterday at $1.06. Since last year, when the company's stock traded at a of $7.59, its value has declined 85 percent.