Warner Bros. boosts Discovery pools executive bonuses after cost cutting

After a brutal year marked by thousands of layoffs and stock struggles, Warner Bros. Discovery has boosted the financial incentives for its CEO David Zaslav and created a new pool of money to pay bonuses to its best executives.

In a regulatory filing Monday, the company said it amended Zaslav’s contract to double the number of performance-related restricted stock awards for which he is eligible. Under the new arrangement, Zaslav can qualify for at least $12 million in stock awards in addition to his salary and other benefits during the years 2023, 2024 and 2025, according to the filing.

Zaslav has long ranked among the highest-paid corporate bosses in America, even when he owned the relatively small cable programming company Discovery. The 63-year-old executive’s compensation packages have long been loaded with rich stock incentives, which have traditionally benefited him as his company’s stock price has soared into the stratosphere.

Last year, Zaslav’s total compensation package was set to exceed $250 million — with nearly three-quarters of that amount, or $202 million — coming from stock options he received as part of a new contract in anticipation of the merger of WarnerMedia and Discovery . However, he didn’t realize that much because of Warner Bros.’s weakened stock price. Discovery.

In addition, we set aside $27 million to pay bonuses to other employees. Almost half of that amount is reserved for corporate and finance executives with cash flow and debt management responsibilities, including Zaslav’s top lieutenants such as Chief Revenue Officer Bruce Campbell, CFO Gunnar Wiedenfels and Global Streaming CEO JB Perrette.

Those three executives would be entitled to $2 million each.

The contract changes and bonus pool come before the one-hundredth anniversary of the rocky union between Discovery and WarnerMedia, the latter of which was previously owned by AT&T. The merger left the combined company burdened with more than $50 billion in debt.

Since the merger, Warner Bros. Discovery has dealt with a more challenging business environment and laid off thousands of workers within HBO, the film and television studio Warner Bros. and Turner networks, including CNN. He canceled movies, including “Batgirl,” and TV shows in an effort to cut costs and qualify for a tax write-off. It reduced the number of “Sesame Street” episodes available for streaming on HBO Max.

The company quickly pulled the plug on CNN+, a streaming service created by the previous administration.

The motivation for Monday’s potential compensation increase, according to the regulatory filing, was to “promote the achievement of the company’s initiatives and reward them for increasing free cash flow and reducing leverage.”

The stock options that make up so much of Zaslav’s compensation package are under water because of Warner Bros.’s sluggish share price.

Warner Bros. stock fell. Discovery last summer was part of an industry-wide shift as Wall Street began to worry that media companies were spending too much money building strong streaming services to compete with Netflix in the streaming wars.

Warner Bros. was burdened with debt. Discovery too. It had to pay a $43 billion special dividend to AT&T as part of the merger last April.

The company’s stock has gained ground in recent months, trading Monday at nearly $16 per share. Still, it’s well below the $24 a share since the new company was founded.

Zaslav’s stock options were tied to a $35-a-share stock price for the past year.

Now, instead of focusing primarily on boosting the stock, the company has shifted its compensation focus to encourage key employees to help find ways to pay down debt and generate free cash flow. The new incentives are tied to those metrics.

“The changes to the executive compensation program of Warner Bros. Discovery is designed to further incentivize the Company’s 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 Chairman of the Board Samuel A. Di Piazza, Jr. in a statement.

“The WBD Board is confident that these additional incentives offer a more competitive package in the context of ongoing industry-wide and economic transformation, and will better position the company to advance the key drivers of shareholder value,” a Di Piazza said.

Last fall, Warner Bros. told Discovery told investors that the cost of downsizing would be more than $1 billion, due to separations among other expenses. The company’s goal was to save more than $3 billion in costs.

Discovery said during its latest earnings call that cost cutting would allow it to improve its financial position sooner than expected.

Separately, the company took out a new loan to repay part of its existing debt.

“The company remains highly leveraged and is therefore in a weak position for its current credit ratings,” Moody’s said in a credit report, which maintained the company’s credit rating at Baa3. “The stable outlook reflects Moody’s expectations that the number of subscribers will increase from the domestic and international expansion of the [direct-to-consumer] streaming platforms will, over time, be able to offset secular pressure.”

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