As Universal Music Group prepares to go public on Tuesday, details about its top executives’ compensation have gone public, too.
CEO Lucian Grainge earned 50.3 million euros ($59 million) in 2020, according to the company’s prospectus released Sept. 14, ahead of its spinoff from parent company Vivendi with a public listing on the Euronext Amsterdam exchange. Grainge has been CEO since 2010 and has overseen UMG’s immense growth in that time, including the 2012 acquisition of EMI Music’s recorded music division that added to UMG’s leading share of the global record business.
Last year, UMG led all labels in U.S. market share, marking its 21st year in a row at the top, according to MRC Data. The company held a 38.5% market share in the U.S. — up 40 basis points from 2019’s 38.1%. Recording acts on UMG’s labels topped the Billboard 200 for 36 weeks in the year, among them Taylor Swift, Lil Baby, The Weeknd and Post Malone. Globally, UMG brought in $8.7 billion in revenue — up 3.8% from the year prior.
Now Grainge’s hard work is really starting to pay off. His 2020 earnings included a 15.5 million euros ($18.2 million) bonus for helping shepherd a 3 billion euros ($3.5 billion) investment from a Tencent-led consortium for a 10% stake in UMG. Executive vp, CFO and president of operations Boyd Muir also got a bonus for his role in that deal worth 3.3 million euros ($3.9 million).
In 2021, Grainge will earn a 17.5 million euros ($20.5 million) bonus from the Tencent consortium’s purchase of an additional 10% stake completed in January, as well as an unspecified amount for Pershing Square Holdings’ 10% stake purchased in August for 3.37 billion euros ($3.95 billion).
Grainge’s going-forward annual compensation amounts to around 36 million euros ($42.1 million), according to a Billboard calculation based on information in the prospectus. Breaking that down, he receives a 12.7 million euros ($14.9 million) annual salary and an 8.6 million euros ($9.4 million) “contingent” cash bonus based on UMG meeting unspecified “financial and non-financial goals.” Grainge is also entitled to retirement benefits of 20% of his annual base salary, with a maximum of 262,000 euros ($307,000), as well as an annual 418,200 euros ($490,000) annual housing allowance. In addition, Grainge gets the use of a car with a driver “for business and reasonable private use,” and the use of a chartered or private aircraft for business purposes up to 410,000 euros ($481,000) per year, although he can exceed that amount with approval. The single largest component of Grainge’s compensation is 1% of UMG’s earnings before interest, taxes and amortization — that was equal to 13.3 million euros ($15.6 million) in 2020.
Grainge’s salary is substantial but not unusually so considering UMG’s size and success. Warner Music Group CEO Stephen Cooper, who has led the company since 2011, earned an average of $13.7 million in 2017, 2019 and 2020. (He made $34.4 million in 2018, which is likely related to the $925-million dividend WMG paid to parent company Access Industries that year.) Cooper, whose base salary of $1 million is less than a 10th of a typical performance-related bonus, is paid a comparable amount to Grainge when adjusting for the companies’ sizes. At a reasonable range, UMG’s market capitalization — $45 billion to $52 billion — is 2.2 to 2.5 times WMG’s current market capitalization of $20.8 billion, while Grainge’s salary is 3.1 times larger than Cooper’s three-year average. If UMG’s value reaches analysts’ top estimates, around $60 billion, its market cap will be about 2.9 times that of WMG, putting Grainge and Cooper on nearly equal footing after adjusting for the sizes of the two companies.
UMG and concert promoter Live Nation also pay their CEOs roughly the same when the companies’ relative sizes are considered. Live Nation CEO Michael Rapino made $11.6 million and $14.6 million in 2018 and 2019, respectively. (Because of COVID-19’s impact on Live Nation, Rapino’s 2020 compensation fell to $4.7 million.) Grainge’s 2020 compensation was 3.6 and 2.9 times larger than Rapino’s compensation in each year. Using the same range for UMG’s market capitalization, UMG is 2.4 to 2.7 times larger than Live Nation.
Grainge, Cooper and Rapino differ in their stock-related compensation, however. UMG does not yet have a long-term incentive program to incentivize its executives, although the new board may establish one, according to the prospectus. Instead, Grainge will receive a substantial bonus after UMG’s admission to the exchange. (The payment will equal 60% of the sum of $150 million and 1% of every dollar of UMG’s valuation once admission exceeds $30 billion. So, a $40 billion valuation would result in a $150 million bonus. A $50 billion valuation would give Grainge a $210 million bonus.) Cooper received roughly 190,000 restricted stock units in fiscal 2021 that vest over four years and are worth $7.8 million at the current $41 share price. Rapino realized $28.7 million from option awards and stock awards in 2020.
Once UMG is a standalone company, its board of directors’ compensation committee will create salary and incentive plans based on a “peer group” of like publicly traded companies. That would likely include Warner Music and Live Nation, as well as possibly Spotify, Netflix and Endeavor, among others. Among those companies’ CEOs, Spotify’s Daniel Ek does not take a salary or other annual compensation — but he owns 16.8% of Spotify’s common shares, valuing his equity at $7.8 billion. Netflix CEO Reed Hastings made $43.2 million in 2020, with $650,000 from a salary and over $42 million in stock option awards. (Netflix’s market capitalization is currently $258 billion.) And Endeavor’s Ariel Emmanuel was paid $14.4 million in 2020 for salary, bonus, equity award and other, according to the company’s 2020 prospectus before it went public on April 29. Grainge’s 2020 compensation was nearly three times greater than Emmanuel’s, while UMG’s estimated market capitalization is 7.6 times greater than Endeavor’s $4.4 billion.
As for UMG’s other leading executives, Muir earned 9.7 million euros ($11.4 million) in 2020 — most of that from a bonus related to the Tencent consortium’s investment. For his annual compensation, Boyd receives a 1.7 million euros ($2 million) annual salary and is eligible for a bonus of up to 3.3 million euros ($3.8 million). Muir’s admission bonus — to be paid in shares — will equal 12.3 million euros ($14.4 million, vested over three years) with an additional 6.1 million euros ($7.2 million) if UMG’s valuation at admission is 30 billion euros ($35.2 billion) and another 1.5 million euros ($1.8 million) if the valuation reaches 40 billion euros ($46.9 billion).
UMG deputy CEO Vincent Vallejo, who joined the company in April from Vivendi, where he has worked with UMG since 2008, has an annual salary of 960,000 euros ($1.1 million). He is eligible for a target bonus of 50% of annual base salary with a maximum payout of two times the target bonus amount, depending on unspecified performance metrics. Vallejo is entitled to receive retirement benefits of 20,000 euros ($23,500) annually. If he is still employed by the company on Feb. 1, 2023, Vallejo will receive a retention bonus of 800,000 euros ($938,000).
UMG will go public on Sept. 21 when it lists on the Euronext Amsterdam stock exchange. Parent company Vivendi will distribute 60% of UMG’s equity to its shareholders and retain 10% for itself. A Tencent-led consortium owns 20% of UMG’s outstanding shares and Pershing Square Holdings owns the remaining 10%.