On Monday, Discovery, Inc. revealed Zaslav’s 2021 compensation neared a quarter-billion dollars. Let that sink in for a moment; we needed a day to digest it ourselves.
Zaslav’s all-in executive compensation package last year reached $246.6 million, according to a Discovery, Inc. proxy filed with the Securities and Exchange Commission. The former NBCUniversal executive, who has spent decades running Discovery under a series of seven-year contracts, has always been among Hollywood’s highest-paid CEOs — but his prior hauls were nothing like this. In 2019, Zaslav made $37.7 million, down from his 2018 take of $45.8 million. So how the hell did he get to nearly $250 million?
To be clear: Zaslav’s $3 million annual salary has remained unchanged for years. Where he’s traditionally made the big bucks is in stock awards and “non-equity incentive plan compensation.” (That’s C-Suite for “cash bonuses.”) Zaslav’s annual target cash bonus as set by the Discovery board of directors is $22 million; he earned that in full for 2021. In prior years, he received a hair below that max.
On the first of this month, Discovery announced that Zaslav received an additional, one-time discretionary bonus of $4.4 million. That one was “in recognition of Mr. Zaslav’s exceptional leadership through the pandemic, the successful launch of Discovery+ and his efforts in 2021 to initiate, negotiate and enter into the transaction with the WarnerMedia Business,” according to the SEC filing. Yes, it was a busy and lucrative year.
Things are starting to add up – but not into the hundreds of millions of dollars. Clearly we’ve got more lines of proxy to analyze.
Zaslav’s 2021 stock awards totaled $13.2 million, which is about in line with previous years. It’s also about as much as the next highest-paid Discovery executive, streaming and international boss JB Perrette, made in total ($13.4 million) throughout 2021.
Last year, Zaslav also recognized $1.1 million in what is filed to the SEC as “all other compensation.” That number and its vague heading effectively refer to retirement monies stashed away as well as medical benefits. (In this magical world where one man can earn $250 million in one year, i’s also what one might consider immaterial.)
Still: That only gets us to $43.7 million. The lion’s share of Zaslav’s gaudy 2021 executive compensation package came from a gigantic options package granted in 2021 and (temporarily, and theoretically) valued at $202.9 million.
Now, that’s not exactly delivered via a Brink’s truck or even in one check. There’s a chance Zaslav may never see that $200-plus million. In theory, he could see none of it. Also possible? He also might get more than that crazy number. It all depends on how Discovery’s stock, which will soon make way for Warner Bros. Discovery’s stock, performs.
Companies like Discovery use what is called the Black-Scholes model to arrive at a reportable value for options packages such as David’s. For the sake of transparency, some number needs to be assigned to Zaslav’s options so shareholders are aware of what the leader(s) of their publicly traded company are earning. Unfortunately, futures numbers are always opaque at best.
The complicated Black-Scholes model essentially derives a value for products like stock shares and futures contracts based on market volatility, various price points, and a given span of time. It considers a current share price with several potential future ones — always higher — to estimate what one is reasonably likely to recognize over time.
At this writing, shares in Discovery, Inc. traded just north of $24. For Zaslav to see any money from the options package, they need to hit a strike price of $35.65 (a level it hasn’t reached since last May). His potential earnings escalate from there, as do the additional strike prices. Making matters more confusing, Zaslav crosses several different vesting periods over his lengthy contracts. Every year new grants vest, allowing Zaslav to buy more sweater vests. (We had to.)
For Zaslav to make lump sums, his company has to make even lumpier sums. At his first share-price target, for example, Zaslav would have created nearly $28 billion in overall shareholder value. This is how companies ostensibly led by billionaire investor John Malone, like Discovery, prefer to reward top executives: Make us a ton of money and we’ll take care of you, too.
Zaslav, who will soon oversee the Warner Bros. studio as well as WarnerMedia, which is home to HBO/HBO Max, the Turner channels, and CNN, will have plenty of shiny new toys with which to make Malone — and yes, much more minor stakeholders — heaps of money. Should he pull that off, we reckon Zaslav will be able to afford those sleeves yet.