Disney’s Iger Pay Slashed! Shock! Horror! Wrong, it Went Up

Given that it is my stock in trade, I can hardly complain about the fact that any trivial company filing that contains news about CEO pay is pored over by hordes of business journalists. Trying to find the story in the filing can get challenging, especially when pay changes reflect properly functioning incentive plans. Thus my tongue-in-cheek headline. The real news, of course, is that Iger's pay didn't go down at all, it went up by 57%.

It looks, from news coverage elsewhere, like Walt Disney (NYSE: DIS  ) CEO Robert Iger's pay went down, though by how much seems to vary depending on the news outlet. A 15% decline seems the consensus. But what really happened?

Disney's performance, according to its chosen metrics, improved year over year from 2012 to 2013. Diluted EPS, segment operating income, revenues, free cash flow, return on invested capital, and net income attributable to shareholders were all up. The only segment where Disney lost out was studio entertainment, and while the interactive segment is still losing money, it lost less than half in 2013 what it lost in 2012. Total stockholder return (TSR) outperformed the S&P 500 over one, three and five years. And, had Disney's stock not weathered the financial crisis so well, it would have outperformed its entertainment peers over each of these time periods also.

And Iger's pay went down?

The company's explanation of the 15% decline is: "... strong results did not overperform against the Committee established performance ranges in fiscal 2013 by the same extraordinary amount as in fiscal 2012," therefore his bonus fell by around $3 million. In addition "... an increase in the discount rate caused a change in the value of his pension benefit of $3.1 million."

Shed no tears for Iger

OK, his bonus was smaller in 2013, but it was still over $13.5 million. The value of the stock awards given to him in 2013 is virtually the same as in 2012, but who knows what they will be worth when Iger decides to exercise the stock options or in three years' time when the company's TSR and EPS performance determines how much of the performance stock vests. So, yes, that "number" went down, but what about the real numbers?

As a matter of fact, Iger exercised 2 million stock options in 2013 for a profit of $55.6 million, and vested in 331,000 shares with a value of $16.8 million. That's twice as much as he earned from stock in 2012. His actual pay went up from $56.9 million to $89.5 million. That's an increase of 57%. The options exercised in 2013 were awarded in 2008, to persuade Iger to stay on as CEO. The profits reflect the stellar stock price performance over that period. The performance shares were awarded in 2009, largely, and passed performance tests and therefore vested.

The company's pay disclosure is pretty exemplary, but highlighting the 15% decline is a little disingenuous. There is another compelling story here -- of great stock performance and therefore huge stock profits for the CEO. How much would shareholders have made if they bought 2 million shares in 2008? The same as Iger did. Why not tell that story in the proxy statement? I'd be happy to read that.

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