Billboard’s 2022 Executive Money Makers report, focusing on stock ownership and compensation, sheds light on the hefty rewards that flowed into the hands of music industry leaders. However, not all parties are applauding these generous rewards, as both shareholders and prominent investment advisory groups have raised concerns about excessive compensation, notably at Live Nation and Universal Music Group (UMG).
Live Nation, the globe’s premier concert promotion and ticketing company, staged a remarkable financial comeback. After posting revenues of $1.9 billion and $6.3 billion in 2020 and 2021, respectively, Live Nation hit a staggering $16.7 billion in revenue in 2022. This remarkable turnaround translated into substantial compensation for the company’s top two executives: President/CEO Michael Rapino and President/CFO Joe Berchtold.
In total, Rapino received a staggering $139 million in compensation, while Berchtold earned $52.4 million. Rapino’s new employment contract is laden with performance-based incentives, including an award of performance shares and restricted stock that vests fully if Live Nation achieves ambitious growth targets and doubles its stock price within five years.
Live Nation defended its compensation program, emphasizing the “strong leadership decisions” made in 2020 and 2021, which set the company on a path to record revenue in 2022. Compared to 2019, the last unaffected year before the pandemic, Live Nation witnessed a 24% increase in concert attendance, 45% growth in ticketing revenue, a remarkable 64% surge in sponsorships and advertising revenue, and at least a 20% increase in per-fan spending across all major venue types. Crucially, Live Nation exceeded 127% of its target adjusted operating income, a metric linked to executives’ cash bonuses.
Photo by Jose Mandojana
The lion’s share of Rapino’s and Berchtold’s compensation comprised stock awards, with Rapino receiving $116.7 million and Berchtold $37.1 million, in addition to relatively modest base salaries. Both executives also secured a $6 million signing bonus for extending their employment contracts in 2022.
Lucian Grainge, who held the top spot in 2021, claimed the third position in 2022 with a total compensation of 47.3 million euros ($49.7 million). Unlike his peers on the list, Grainge, who has served as CEO of UMG since 2010, did not receive substantial stock awards or options. Instead, he was granted a performance bonus of 28.8 million euros ($30.3 million), coupled with a salary of 15.4 million euros ($16.2 million), by far the highest among music executives.
However, shareholder discontent with executive pay packages has been on the rise, notably at Live Nation. Influential shareholder advisory groups, Institutional Shareholder Services and Glass Lewis, recommended a “no” vote in the advisory “say on pay” vote during Live Nation’s annual meeting on June 9, citing excessive compensation. Shareholders followed suit, voting against executives’ pay packages by a 53-to-47 margin.
Failed “say on pay” votes are rare among U.S. corporations, with only 2.1% of Russell 3000 companies and 2.3% of S&P 500 companies receiving less than 50% approval on executive compensation through August 17, 2023, according to executive compensation consultancy Semler Brossy. ISS expressed concerns that the stock grants awarded to Rapino and Berchtold exceeded total CEO pay in peer group companies and were inadequately linked to achieving sustained higher stock prices.
To determine executive compensation, Live Nation’s compensation committee considered high-earning executives from various companies, including Netflix, Universal Music Group, SiriusXM, Spotify, Endeavor Group Holdings, Fox Corporation, Warner Bros. Discovery, Inc., and Paramount Global. Notably, Netflix co-CEOs Reed Hastings and Ted Sarandos received $51.1 million and $50.3 million in compensation in 2022, while Warner Bros. Discovery CEO David Zaslov earned $39.3 million, including a $21.8 million cash bonus.
In addition to Live Nation, UMG also faced shareholder dissent, with only 59% approval for its 2022 compensation. This disapproval was notable, considering that the company’s four largest shareholders own 58.1% of outstanding shares, indicating minimal support from minority shareholders.
UMG shareholders may see a different outcome in the future. Anna Jones, chairman of the music company’s remuneration committee, pledged that in 2024, shareholders would vote on a pay package related to Grainge’s new employment agreement, which takes into account minority shareholders’ concerns from the 2022 annual meeting. Grainge’s contract will reduce his cash compensation, with over half of his total compensation tied to stock and performance-based stock options.
While some executives faced resistance from shareholders, others enjoyed substantial earnings. Two iHeartMedia executives, Bob Pittman, CEO, and Richard Bressler, president, CFO, and COO, ranked among the top 10 best-paid music industry executives. Their inclusion was attributed to new employment contracts rather than the company’s financial performance. Both received performance stock awards, with Pittman earning $6.5 million and Bressler receiving $6 million for signing new four-year employment contracts in 2022. These shares will vest over five years based on shareholder return performance.
Spotify co-founders Daniel Ek and Martin Lorentzon continued to lead in terms of stock ownership in public music companies. Ek’s 15.9% stake is valued at nearly $4.8 billion, while Lorentzon’s 11.2% stake is worth almost $3.4 billion, benefiting from Spotify’s surging share price in 2023.
The list of top stockholders also includes HYBE chairman Bang Si-hyuk, who holds 31.8% of outstanding shares, valued at $2.54 billion, and CTS Eventim CEO Klaus-Peter Schulenberg, whose 38.8% stake, held through his KPS Foundation, is worth $2.25 billion. Both saw their holdings appreciate significantly in 2023.
Interestingly, the majority of the top shareholders are company founders. Park Jin-young, founder of K-pop company JYP Entertainment, possesses a $559 million stake in his label and agency, founded in 1997. Hyunsuk Yang, chairman of YG Entertainment, another K-pop mogul, owns shares worth $199 million in the company he established in 1996. Denis Ladegaillerie, CEO of French music company Believe, boasts a 12.5% stake valued at $112.7 million.
Michael Rapino, the only CEO in Live Nation’s history, also makes the top 10 list due to his substantial stockholding over a lengthy career, during which he significantly increased the company’s value. Rapino assumed the role in 2005 when Live Nation was spun off from Clear Channel Entertainment, and he has helped drive the company’s market capitalization from $692 million to $19.1 billion.
