Shareholders Quiz Radio One on Raises

'This Looks Kind of Flaky,' Officers Told

Radio One investors grilled the company's officers during a shareholders meeting yesterday, questioning the propriety of a new compensation package for chief executive Alfred C. Liggins III and founder Cathy Hughes.

Given the precipitous decline of the value of Radio One stock over the past year, several shareholders asked whether now was the time to give hefty pay increases to Liggins and Hughes, his mother.

Under his new contract, Liggins will receive $1 million for having been underpaid the past three years. He will also get a 70 percent raise that will bring his annual salary to $980,000, plus the possibility of a bonus in that amount. Hughes will receive a 75 percent salary increase, bringing her pay to $750,000 a year.

"This looks kind of flaky; it looks off the wall," said shareholder Paul Woods. "I can't see the justification for bonuses at this point in time."

"Why is it . . . the stock goes from here to here, the losses go from here to here," said shareholder E.K. Hobson, holding his hand level in the air and then dropping it. "Why do you keep getting raises?"

Radio One board member B. Doyle Mitchell Jr., president of Industrial Bank, said the board held off awarding Liggins a new contract for three years in part because it was awaiting the results of a consultant's review of chief executive salaries at comparable companies.

"Had the same contracts been executed three years ago, we probably wouldn't have been having this conversation," Mitchell said.

Hobson, the shareholder, also expressed concern over the company's $400 million write-downs last year for the sale of underperforming radio stations.

"We didn't really lose that money," Liggins said. "We continue to be cash-flow positive." Accounting principles required reporting the sales as write-downs because they had lost value since Radio One acquired them. Competition from the Internet, satellite radio and other technologies has eroded advertising revenues at Radio One and media companies nationwide.

"When Radio One stock was $33, the Nasdaq was at 5000," Liggins said. Yesterday, the Nasdaq closed at 2486.70 and Radio One shares were down 5 cents, to $1.12. "I'm disappointed at our stock price, but I understand exactly why it is, and I hope you do, too," Liggins said.

Hughes said that because she and Liggins control the majority of the voting stock in the company, they also have taken the biggest hit in the decline of its value.

"No pain, no gain," she said. "You don't grow if you're not challenged."