The Ledger is a weekly newsletter about the economics of the music business sent to Billboard Pro subscribers. An abbreviated version of the newsletter is published online.
Music industry executives at publicly traded companies are paid well – but they’re not the only ones.
As Billboard reported in the inaugural Money Makers list of music’s highest-paid executives and stockholders at publicly traded companies, 10 business leaders earned nearly or more than $9 million in 2021. Of those, most of their compensation came from stock awards and stock options, not base salary or performance bonuses. For example, only 5% of SiriusXM CEO Jennifer Witz’s $32.6 million total compensation came from a guaranteed salary. As is common practice among publicly traded corporations, SiriusXM tied most of Witz’s compensation to its stock’s long-term performance.
Similarly, three employees of South Korean company HYBE made the top 10 list — $35 million, $34 million and $25 million – because they cashed in stock options after the company went public in October 2020. Because stock and option awards are uneven from year to year, Witz’s 2022 compensation could be drastically different, and the three HYBE executives might not make next year’s list.
It’s not chump change, but music executive paydays are generally lower than those seen in other tech and content companies. In film and television, Disney’s former CEO and current chair of the board Bob Iger made $45.9 million — as much as anyone on Billboard’s list except for Universal Music Group CEO Lucian Grainge (see below). Netflix’s co-CEOs, Reed Hastings and Ted Sarandos, each earned $34.7 million. Bob Chapek, Disney’s new CEO, made $32.5 million – about the same as SiriusXM’s Witz. Paramount Global president and CEO Robert Bakish would have placed No. 6 on Billboard’s list with $20 million.
Some people would argue those media executives are overpaid. “Entertainment companies have some of the worst compensation practices for their executives of any industry,” Rosanna Landis Weaver, program manager of the CEO pay program at shareholder advocacy group As You Sow, told Variety earlier this year for an article about film and television companies’ executive compensation. One reason companies have similar compensation schemes is because they use one another as reference points. A board of directors’ compensation committee uses a peer group of similar companies when determining a level of appropriate, competitive executive pay. For 2021, Spotify’s compensation committee used a peer group that included a mix of tech and entertainment companies such as Snap, Discovery, Activision Blizzard, Netflix, Live Nation, SiriusXM and Electronic Arts. Similarly, Live Nation’s peer group included Activision Blizzard, Spotify, Universal Music Group, Warner Music Group, Paramount Global and Netflix. Electronic Arts’ peer group includes Activision Blizzard, SiriusXM, Snap and Warner Bros. Discovery.
As long as companies use this system, CEO pay will remain where it stands today, Charles M. Elson, professor of finance in the University of Delaware’s Alfred Lerner College of Business and Economics, told Variety. “The benchmark that they measure themselves against is too high to make any substantive changes feasible.”
Not all music executives are in the league of Chapek, Hasting and Sarandos, however. Of nine companies not represented in Billboard’s top 10, the average CEO pay was $4.6 million. That excludes Spotify CEO Daniel Ek, who does not receive a salary (but topped the list of stockholder ownership with $3.6 billion). Predictably, compensation varied according to the company’s revenues and market capitalization. The lowest-ranked U.S. music CEO was LiveOne’s Robert Ellin with total compensation of $621,000. Outside of the U.S., Believe CEO Denis Ladegaillerie made $444,000 (but ranked No. 7 in terms of stock ownership with $106 million) and HYBE CEO Park Ji-won was paid $445,000 (both amounts were converted using the average 2021 exchange rate).
The recent bear market will take a bit out of many music executives’ take-home pay. Companies tend to value stock awards and options at the time of the grant. But what ends up in executives’ pockets could be drastically different. Spotify’s share price, for example, is down 52.9% year-to-date, for example. HYBE is down 54.7% mainly because BTS’s members are pursuing solo projects. Any HYBE executive with stock options – such as those on top 10 list – was wise to sell before that news broke.