Viacom CEO paid more than you think: Expert

Dauman: Viacom outlook distorted
Dauman: Viacom outlook distorted   

Philippe Dauman is in the hot seat.

Not only is Viacom's CEO and newly appointed chairman under fire for the media company's recent poor performance, but an activist investor is raising questions about his outsized pay, which consistently places him among the highest-paid chief executives in the country.

The headline numbers, however, do not always tell the whole story. In fact, a deeper dive into SEC filings shows the amount of money Dauman has earned at the helm of the media giant is much higher than some reports suggest.

Philippe Dauman, Viacom
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Philippe Dauman, Viacom

SEC filings show that during Viacom's 2011 to 2015 fiscal years, Dauman actually received $425 million, or an average of $85 million a year, in salary, cash bonuses, gains from exercised options and from vested stock grants. That number excludes options that have not been exercised, stock grants that have not vested, perquisites and the change in the value of his pension.

During the same time period, from Oct. 1, 2010, to Sept. 30, 2015, Viacom's Class B shares were down 15 percent.

"This is a real money look. That is money that was actually banked," said Brian Foley, a compensation consultant and CEO of Brian Foley & Co.

Executive pay can be a tricky thing to nail down. The number companies typically point to when discussing it is the total number highlighted in the summary compensation table of a company's proxy.

Using this, it would suggest Dauman earned $37.1 million in fiscal 2015 — the number being the sum of his salary, option awards, stock grants, cash bonus, change in pension and perquisites.

But looked at another way, which includes the $37.1 million plus an unvested stock award of $17 million linked to his contract renewal, that number rises to $54.1 million.

There is also a third way of calculating Dauman's pay for fiscal 2015. Using that method, he took home $112 million — roughly three times the total number in the summary compensation table. The $112 million is calculated by combining his $4 million in salary, $14 million in a cash bonus, $64.6 million worth of gains from exercised options and $29.5 million from realized stock grants.

When looking at the summary compensation table numbers, Foley said much of what you see is grant value of equities on a specific day. But they are unlikely to be worth that amount on the day they vest, or the day the executive can actually sell them. That means the executive could pocket less than what is in the table, or more.

To find the real number, he said, you need to look the numbers in the proxy detailing the gains realized from exercising options and the value of stock grants when they actually vest.

According to SEC filings, from fiscal 2011 to 2015, Dauman's salary and cash bonuses totaled $100.9 million. During those same years the value of vested stock grants totaled $187.4 million, and gains realized from exercised options totaled $136.8 million. That brings what many would see as his take-home pay to $425.1 million.

Viacom's challenges ahead
Viacom's challenges ahead   

One thing to consider when looking at this number is what Dauman did with the stock from the grants, options and his own purchases. Has he held onto it, has he sold it for personal gain, or was it withheld by the company to pay for his taxes? A person familiar with the situation said a majority of the stock Dauman sold was withheld for tax purposes.

Applying the highest federal tax rate of 39.6 percent to the value of his equity grants and exercised options over those five years leaves the value at $153.9 million, still a far cry from the amount of outright equity (excluding unexercised options) he currently holds.

Per the company's 2016 proxy statement, he owned 1,242,128 shares as of Dec. 15, up from the 354,017 shares of Class B stock he owned at the end of 2010. Over five years his holdings have increased by 888,111 shares. Viacom points out 300,000 of those shares were purchased by Dauman with his own money.

At Tuesday's closing price of $32.86, the value of those additional shares he has accumulated from 2011 to 2015, is about $29.2 million— a fraction of the $324.2 million worth of equity he received over the last five years.

Viacom pointed out that, like other shareholders, Dauman has lost money during the stock's recent slide. Indeed, at the stock's closing peak of $88.28 in 2013, the 1,174,134 shares he held at the end of that year would have been worth $103.6 million dollars. At Tuesday's close, the same number of shares was worth $38.6 million — a $65 million dollar loss.

Dauman has been a significant seller of Viacom stock. Foley pointed to SEC filings that show from 2011 to 2015, Dauman reported getting 6.42 million shares though purchases, grants and options, and sold 5.53 million shares.

He has sold a lot of it during times of peak performance. In August 2013, when Viacom's stock was trading at more than $80, he sold four blocks of stock totaling 1.62 million shares.

"Almost 90 percent of Mr. Dauman's compensation is performance or equity based, aligning his interests closely with all shareholders. As of Viacom's January proxy, Mr. Dauman held more than 5 million shares of Viacom stock, including options — representing a vote of confidence in Viacom and well within the standards for CEOs at America's largest companies," the company in an email sent to CNBC.

There is nothing that prohibits a CEO from selling stock, though companies may have guidelines requiring they hold a certain number of shares during their tenure. According to the law firm Shearman & Sterling's 2015 Corporate Governance and Executive Compensation Survey, 93 of the top 100 companies maintain stock ownership guidelines, with 79 of those requiring a CEO maintain stock worth a multiple of their base salary.

Of those companies, 57 require a CEO's stock holdings be five to six times their base salary. So with Dauman's salary at $4 million, his $37.2 million in stock holdings would satisfy that criteria (though a person familiar with Viacom's pay structure said the company does not have a specified multiple).

CEO of Viacom since 2006, Dauman recently added the chairman title, after longtime Executive Chairman Sumner Redstone resigned amid questions about his health and mental competence.

In recent years, he has often been among the highest paid CEOs. In 2010, according to the executive compensation research firm Equilar, he was the highest-paid CEO among S&P 500 companies, with $84.5 million in compensation that included salary, cash bonus, stock and option grants.

Update: This story has been updated to include additional comments from Viacom.