Warner Bros. Discovery has tweaked its CEO’s employment contract, granting a bigger pot of restricted stock units but linking them to free cash flow targets.
David Zaslav, who is currently entitled to receive annual performance-related restricted stock (PRSU) awards with an initial value of $12 million, could now double the number of shares underlying that if the company meets targets. And he’s also eligible to receive an additional PRSU award valued at $11.5 million this year and for the next two years.
In an SEC filing today, WBD said it is also setting aside another $27 million worth of PRSUs for top executives and other employees.
Free cash flow, the amount a company generates after accounting for all capital expenditures, is a key metric, allowing companies to pay down debt. That’s a major focus for WBD, whose debt stood at nearly $50 million at year end.
Zaslav has frequently been among the highest paid CEOS in media, and across all sectors. His total compensation last year came to $276 million, inflated by a $202 million stock option grant when his contract was extended ahead of the Discovery-Warner Media merger. The options do require the stock to hit certain metrics staggered over seven years before they’re in the money.
Executive pay is complicated. Zaslav’s annual grants have been (and the enhanced grant still will be) based 75% on so-called “qualitative” performance measures, which are less specific and more subjective, and 25% on “quantitative” criteria, or numbers, which will now mean free cash flow. The new additional grant flips that and will be 75% quantitative — in this case free cash flow — based.
The executives eligible for initial, special PRSU grants worth a combined $9.5 million this year include: chief revenue and strategy officer Bruce Campbell; CFO Gunnar Widenfels; CEO of global streaming and games, JB Perette; President, International Gerhard Zeiler; chief people and culture officer Adria Alpert Romm; and Savalle Sims, EVP and general counsel.
“The changes to the Warner Bros. Discovery executive compensation program are designed to further incentivize Company employees, including members of its leadership team and others whose efforts are critical to achieving the key near-term financial objectives of increased free cash flow and reduced leverage,” said WBD board chairman Samuel A. Di Piazza, Jr. “The WBD Board is confident that these additional incentives offer a more competitive package against the backdrop of ongoing industry-wide transformation and economic headwinds, and better position the company to advance core drivers of shareholder value.”
The number of Zaslav’s annual PRSUs as well as the additional PRSUs for the 2023 awards will be determined based on WBD’s closing stock price on February 28 of $15.62.
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