Institutional Shareholder Services, a proxy adviser, has criticised a $247mn pay package for Discovery chief executive David Zaslav, setting up a showdown with investors as the media company is finalising its acquisition of WarnerMedia.
Citing “significant concerns” with “excessive” stock options given to Zaslav, ISS recommended Discovery shareholders withhold voting for the three company board directors up for election on April 8. Shareholders should also vote against a new stock plan that is “excessively dilutive”, ISS said.
“The company has a long history of poor pay practices, which have persisted in 2021,” ISS said.
Zaslav made $129mn in 2018, making him the highest paid US chief executive that year. In May last year, one day before the merger deal between Discovery and WarnerMedia was announced, Zaslav received a new contract with $190mn in stock options. Those options would start to pay out if the company’s share price hits $35.65 and at higher strike prices in the years ahead. Discovery’s shares closed at $27.34 on Friday, down 35 per cent from a year earlier.
“Equity awards of this magnitude are unusual and are in addition to the annual grants of equity Zaslav received in 2021 and is expected to receive going forward,” ISS said. “Such pay levels are also disproportionate to company performance, as demonstrated by negative shareholder returns over the last five-year period.”
Zaslav also received a $22mn annual bonus. In 2021, he received more than $1mn for a private jet, personal security and a car, ISS said.
A Discovery spokesman declined to comment.
ISS’s recommendations are unlikely to affect Discovery. The company’s voting rights are mostly held by billionaire John Malone and Advance Publications.
Discovery said this month that the WarnerMedia acquisition was expected to close early in the second quarter. The boards for AT&T, which currently owns WarnerMedia, and Discovery have approved the transaction.
Some Discovery shareholders have expressed concerns with the company’s pay plans. At a special meeting this month related to the WarnerMedia deal, Norges Bank Investment Management said it voted against the plans.
“The board should ensure that all benefits have a clear business rationale,” said NBIM, which manages Norway’s oil fund. “Pensionable income should constitute a minor part of total remuneration.”