Saturday, January 13, 2007

Disney CEO Underpaid?

The WSJ reports that Disney CEO Bob Iger received a $15 million cash bonus and $2 million salary for a first year on the job in which Disney's earnings and stock price surged.

Mr. Iger, who assumed the top job in October 2005, also received long-term incentive pay of $4 million; 411,000 stock options hypothetically valued at $3 million, and about $666,000 to cover costs including security, personal air travel and car benefit. Mr. Iger also exercised $8 million of expiring options over the period.

Total it all up and it's about $32 million in compensation. Sounds like a lot, but what happened to Disney's stock during that time? It went from $23/share in October 2005 to about $35 today (more than a 50% increase), and Disney's market capitalization went from about $48 billion to $73 billion, an increase of $25 billion in value for shareholders. Iger's $32 share of the increased $25 billion value for shareholders is about 1/10 of 1% (.13%).

Assuming that Iger played an important role in creating $25 billion of additional shareholder value, it's not a bad deal for shareholders to pay him only $32 million. For every $1 of CEO pay to Iger, shareholders got $781.25 in increased value, not a bad deal. Perhaps Iger is underpaid?

Thanks to David Boaz at Cato.


At 1/13/2007 11:23 PM, Anonymous Anonymous said...

Mickey and Mortimer forces at work. Look what Walt & Lillian started.

At 1/14/2007 8:47 AM, Anonymous Robert Knutsson said...

One should probably discount for the overall good year on the stock market and not give Iger full credit for the increase.

However, more people (journalists and politicians) should think like this.

At 1/14/2007 4:01 PM, Anonymous Anonymous said...

When athletes sign contracts for 250 million and we complain when a CEO who actually works for a living makes as much we really need to change our values system.


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