Really Big Packages
What unmitigated gall. Entertainment Weekly suspended its usual pabulum spewing to piss on celebrity perk packages in its recent, laughably titled article “New Age of Greed.” In the piece, unnamed executives at movie studios, TV networks and record labels whine about unnamed stars who dare to demand $40,000 private-jet flights to carry their luggage and $35,000 basketball courts to entertain them on location. The article even gripes that celebrity perks add about 5 percent to the bottom line of a film’s cost. “Given that the average studio film now costs $98 million to produce and market, that can be $5 million in perks,” EW gasps. “Say a studio releases a dozen movies a year, that’s $60 million — enough to make a Sideways roughly every three months.” Forget, for a moment, the stupidity of an entertainment publication that is shocked to find that stars are wasting Hollywood’s money. The same outrage was heard throughout the 1980s and 1990s over Demi Moore demanding vintage dolls for her collection or Tom Cruise a co-op in Manhattan. Forget the cowardice of magazine editors who won’t finger-point for fear those celebs will refuse to do EW covers. (Even though documents filed in the ongoing lawsuit over the collapse of the Basic Instinct sequel made public Sharon Stone’s five pages of demands including Pilates equipment, a $3,500 per diem for armed bodyguards, a chauffeured car with a nonsmoking driver, three nannies, two assistants, a presidential suite, deluxe motor home, and on ad nauseam.) Instead, remember this: Hypocrisy, thy name is EW’s parent company, Time Warner. Chairman and CEO Dick Parsons gave himself a perk that’s a monument to ego: a 5,000-square-foot, 21st-floor, marble-and-rare-wood dream suite (a supposed $25 mil to build out) inside the swankiest and priciest NYC office space, the new Time Warner Center. Parsons and the other heads of the Mammoth Media conglomerates feeding America its infotainment — Disney, Sony, Viacom, General Electric and News Corp. — may gag on celebrity greed, but they never stop indulging their own corporate gluttony. Wanna hurl? Look at the latest shareholders-be-damned headlines this week about Viacom — owner of Paramount, CBS, MTV, VH1, and Infinity radio — disclosing that it gave its top three moguls a 58 percent pay increase even though the company’s stock price fell 18 percent in 2004. A Viacom spokesman noted that the bonuses for all executives were tied to operating income, not share price. It’s not just the arrogance of rich, old Viacom chairman Sumner Redstone claiming he cuts costs at every corner while at the same time lining his own pockets at the expense of investors that’s so nauseating. It’s also the profligacy of a public company shameless enough to reimburse Les Moonves, who lives in Los Angeles but also has a New York apartment, $105,000 for the period he stayed in New York at his apartment instead of at a hotel, or Tom Freston, who is based in New York but also has a residence in Los Angeles, $43,100 for the time he spent staying at his L.A. home instead of a hotel. Talk about chutzpah: This is paying these guys to live in their own homes. For that matter, departing Walt Disney CEO Michael Eisner received $735,000 for security services, personal protection and equipment. That’s on top of the $8.3 million in salary, bonus and other compensation in the same year he was the target of a shareholder revolt. The examples are legion. Besides the disputed $20 million golden parachute, French-based Vivendi Universal paid for all sorts of extravagant perks to chief executive Jean-Marie Messier before his ouster. Reportedly, Viv U picked up the tab for a $140,000-a-year butler, a $75,000-a-year chauffeur for Messier’s wife, plus the heating bills in the $17.5 Park Avenue duplex the company bought for him — all while shareholders were kept in the dark about the extent of the conglom’s financial problems. Given such wretched excess, those toys for Hollywood A-listers seem like chump change.
Celebrities can make all the demands they want, but someone has to underwrite every perk. Whereas, when it comes to corporate gluttony, the execs are writing the checks to themselves. That’s because, increasingly, the CEOs consider themselves celebs. That’s certainly how Vanity Fair’s New Establishment unctuously began describing them a decade ago. And when it comes to Hollywood, who doesn’t believe their own publicity? In his book, Why Smart Executives Fail, business professor Sidney Finkelstein says CEOs who have a long or impressive track record may come to feel that they've made so much money for the company that the expenditures they make on themselves, even if extravagant, are trivial by comparison.
In turn, The S.E.C. does not require companies to describe many big portions of an executive's compensation in any company filing, while others must be explained in only a vague way. And for those execs who turn down a seat on the board, their paychecks escape public scrutiny through a loophole in SEC reporting requirements. That’s why Warner Bros. fat cats Bob Daly and Terry Semel skated for so long making more even than their Time Warner boss Gerald Levin (the pair reputedly took home more than $30 mil each). Of course, they learned bad habits from their old boss.
The monster of megabuck mayhem was the late Steve Ross, the Warner tycoon, who never spent a dollar of corporate money if he could spend a million. Freewheeling and free-spending, Ross single-handedly ushered in the show-biz era of extravagance (which raised the bar for copycat corporate masters of the universe in other fields) by showering stars and other big shots with trips in private jets and stays in Aspen chalets and Acapulco villas owned by the company. Of course, the studio bigwigs got as much as they gave. Ross’ legacy of how a studio legend should live is still being emulated decades later. It’s why former Paramount Communications president Stanley Jaffe installed a screening room in his Westchester, New York, home at a cost to the company of $1.5 million. (When Bill Mechanic was president of 20th Century Fox, he eschewed that goody, telling one reporter, “I’d rather see movies in theaters, with real people.”) It’s why Peter Guber, the onetime chairman of Sony Pictures Entertainment, saddled his employer with his Bel Air mansion, along with a laundry list of perks. Among the things Sony acquired for that staggering $5.5 million, besides the “Rolls-Royce of flotation tanks,” was a $3.5 million loss on its books when the house was finally resold. Yet Guber, whose tenure resulted in $3.2 billion of Hollywood losses for Sony, had the nerve in his recent book Shoot Out (co-authored with Variety editor Peter Bart, who should have known better) to bitch about spiraling star demands. What Ross was to the men, Dawn Steel was to the women. After she famously had a baby before taking over at Columbia Pictures, Steel was the first to negotiate all sorts of now-routine, child-friendly perks, like an on-site nursery, into her contract. It would be curious to see which of today’s women execs griped to EW about the proliferation of $1,500-a-week nannies being paid by the studios for the offspring of celebrities making movies. Some of these stealth forms of show-biz CEO compensation only come to light because of lawsuits. Indeed, it took Jane Welch to spill the beans about her husband’s retirement perks in a divorce filing because GE had never disclosed the New York Knicks tickets, satellite television service, wine, country-club memberships, an $80,000-per-month Manhattan apartment along with continued use of the corporate jet, not to mention free toilet paper for life. So unless Jane Eisner tires of Michael hanging around the kitchen all day in his Mickey Mouse PJs and suddenly divorces him, come September we may never know the lavishness of Eisner’s Disney-funded retirement. Chairman George Mitchell stammers whenever the subject comes up, saying only that the company will honor Eisner’s employment contract, which is reportedly being renegotiated. Of course, since he started at Disney in 1984, Eisner already has earned $1 billion in salary, bonuses and exercised stock options. Yet isn’t it ironic that Eisner, notorious for nickel-and-diming employees as well as stars, is such a penny pincher when it comes to everyone but himself? One of the most telling anecdotes in James Stewart’s new book, DisneyWar, is how Disney’s perk-addicted president Michael Ovitz came up with the absurd idea that the company should give a gift to Bob Iger, then the head of ABC television, to acknowledge his hard work. “Why?” Eisner asked. “He’s got a contract. He’s not going anywhere.” “Don’t you want him to be comfortable, happy in his job?” Ovitz asked. “Not really,” Eisner replied. Recent newspaper and magazine articles purport to spot an Industry trend that such iconic and iconoclastic show-biz megalomaniacs are being replaced by a breed of “pinstriped, buttoned-down brass” and “stoic, faceless suits,” to quote Forbes. What a bunch of crap. The new guys have waited all their careers to be in charge just to bring home the same gargantuan package of bonus, stock options and perks as their craven predecessors. Especially when the boards of directors are still so packed with insiders, like Disney’s. Does anyone doubt that newly named CEO Iger will be vastly improving upon the $12 million he got as president, including a $6.5 million bonus and $3.45 million in incentive pay? Then there’s News Corp. president Peter Chernin, whose primary job by all accounts is baby-sitting the company until Rupert Murdoch’s idiot sons Lachlan and James are ready to take over the public corporation’s throne (that fact alone should make shareholders shudder). Though the company makes much of the fact that Chernin’s new contract calls for his bonus to be tied entirely to improving the company’s earnings per share, for fiscal 2004 he received an $8.3 million base salary, an $8 million bonus and 500,000 stock options valued at $1.79 million. But Chernin is also granted a severance package if he’s terminated without cause, including a lump-sum payment of $40 million and the vesting of all his stock options. Yes, it’s Ovitzian, but at least Chernin has been on the job longer than Ovitz’s 14 months at Disney, which included $300 charged-to-the-company breakfasts. The Delaware Chancery Court judge is expected to rule this summer in the Disney shareholders’ suit over Ovitz’s lavish $140 million severance payout. But it’s comforting to know the money is going to such a good cause: Casa Ovitz, a 30,000-square-foot estate with a covered tennis court, a 13-car garage, an art gallery and a yoga room, which he is building in the posh Los Angeles enclave of Benedict Canyon much to his neighbors’ chagrin. But that pales in comparison to the media-elite lifestyle Chernin’s boss Rupert Murdoch chooses to lead, with his recent purchase of Laurence Rockefeller’s Fifth Avenue penthouse co-op at $44 million, the highest ever for a residence in Manhattan at the time. So listen, moguls, those who live in extravagant, perk-filled glass houses shouldn’t cast the first stone.
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