David Zaslav's golden parachute reaches new heights

Even among the lofty realm of aureate parachutes, Warner Bros. Discovery Chief Executive David Zaslav’s projected payday stands out.

Zaslav, 1 of the astir richly compensated executives successful America, is poised to person arsenic overmuch arsenic $887 cardinal to depart the institution erstwhile it is absorbed by David Ellison’s Paramount Skydance, Warner Bros. Discovery disclosed successful a caller proxy.

That magnitude “represents 1 of the highest aureate parachute estimates ever observed,” capitalist advisory steadfast Institutional Shareholder Services wrote successful a study this week. “Support for the aureate parachute connection is not warranted.”

Warner shareholders connected April 23 volition ballot connected the company’s $111 cardinal merchantability to Ellison’s Paramount — a meaningful people arsenic Ellison and his squad contention to enactment up the approvals for the manufacture re-shaping deal, which they anticipation to finalize this summer. That ballot is binding.

The acquisition is expected to trigger important layoffs and different cost-cuts arsenic the caller owners consolidate 2 legendary studios and TV operations, including dozens of cablegram channels.

Stockholders besides volition beryllium asked to measurement successful connected Zaslav’s compensation package, though that ballot is non-binding.

Several factors contributed to largesse for Zaslav, who has been moving the debt-laden institution for 4 years.

Warner board’s agreed past period to screen Zaslav’s taxation liabilities pursuing the merchantability to Paramount. Warner approved a proviso to wage up to $335 cardinal to reimburse Zaslav for excise taxes helium volition beryllium erstwhile helium cashes out.

Warner sought to warrant the arrangement, saying successful the proxy that Warner’s archetypal woody to merchantability the institution to Netflix — which was Zaslav’s favored result — would person resulted successful little taxation liability. Netflix withdrew from the bidding, leaving Paramount to assertion the prize.

Tax advisors recovered that “Mr. Zaslav would beryllium astatine a important disadvantage successful presumption of excise taxation vulnerability nether the PSKY transaction,” Warner’s proxy said. The Netflix woody was much advantageous to Zaslav “due to anticipated closing timing and different factors,” according to the company.

“There are important concerns raised by an estimated $335 cardinal excise taxation gross-up for the CEO,” ISS said successful its report, noting that nary of the different Warner executives person arrangements to beryllium reimbursed for their taxation payments.

According to ISS, different eyebrow-raising constituent was that the immense bulk of Zaslav’s estimated compensation — implicit 94% — was being derived by the automatic acceleration of banal vesting and the excise taxation gross-up payment.

Ellison is gunning to get the woody done earlier this fall. Should the income process spill into adjacent year, however, Zaslav’s taxation liability representation would amended and the $335 cardinal set-aside would not beryllium needed, according to documents.

The taxation reimbursement estimation for Zaslav, who lives successful New York, was “calculated based connected a 20.00% excise taxation complaint and an estimated effectual taxation complaint of 54.126% ,” Warner said.

In addition, Zaslav is expected to person $34.2 cardinal successful cash. His banal is worthy $517 million.

A Warner spokesperson declined to comment.

Warner shares were trading astir $12.50 a stock past September earlier Ellison’s involvement successful the institution became known.

Paramount yet agreed to wage $31 a stock for the institution that includes CNN, HBO, HGTV, Cartoon Network, the Warner Bros. movie and TV studios and the storied field successful Burbank. (Warner shares connected Thursday closed astatine $27.53 a share, virtually unchanged)

Should the adjacent day gaffe beyond September, Paramount agreed to wage Warner investors an other 25 cents a stock for each fiscal 4th until the acquisition is wrapped up.

After absorbing Warner Bros., Paramount volition person to contend with an estimated $79 cardinal successful debt, prompting fears astir much layoffs to travel successful an manufacture already hammered by years of cutbacks. Fitch Ratings has downgraded Paramount’s recognition owed to concerns astir the debt.

Still, investors should o.k. the transaction, ISS said, noting that it was “the effect of a competitory income process and nationalist bidding warfare betwixt NFLX and PSKY, which provides shareholders comfortableness that the projected woody is the champion available.”