Influential shareholder advisory groups Institutional Shareholder Service and Glass Lewis have advised Universal Music Group (UMG) investors to vote no on a UMG compensation report detailing CEO Lucian GraingeThe 2023 pay package, which included a one-time $100 million stock and option award, when put to an advisory vote at UMG's annual meeting on May 16.
It is the second year in a row that ISS and Glass Lewis have criticized Grainge's compensation package – with ISS calling it “excessive” and Glass Lewis saying it had “serious reservations” about UMG's remuneration report – and will could spark opposition among investors, many of whom expressed reservations about the payments at last year's annual meeting.
UMG did not respond to a request for comment.
While investor advisory votes are not binding, and Grainge and other UMG executives are expected to retain their compensation regardless of the outcome, they are seen as a measure of the investment climate, which has hardened in recent years.
Last year, a slim majority of UMG investors – around 59% of shares – voted in favor of executive pay packages for Grainge, who has been UMG's CEO since 2010, and his deputy CEO Vincent Vallejoat the company's annual meeting.
Other media and entertainment companies fared worse. Cumulus Media investors overwhelmingly rejected the CEO Mary Berner$4.5 million in compensation for 2023 earlier this month. Last June, 53% of Live Nation shares were voted against the CEO Michael Rapinoeof his nearly $139 million 2022 compensation package.
Rapino and president/CFO of Live Nation Joe Berchtoldwho earned $52.4 million in 2022, were the highest-paid music executives that year, and the board of the world's largest concert promoter and ticketing company said the pay reflected “strong leadership decisions” made during the pandemic which contributed to a record $16.7 billion in Live Nation revenue in 2022.
Grainge, 64, was the third-highest paid music executive of 2022, receiving total compensation of €47.3 million ($49.7 million) thanks to an additional €28.8 million ($30.3 million) performance bonus base salary of 15.4 million euros ($16.2 million).
For 2023, Grainge's base salary and cash bonus were halved to €7.5 million (just over $8 million) and €15.16 million (almost $16.3 million), respectively. The significant boost to his total compensation comes from a one-time transition equity award worth €92,406,852 (about $100 million) consisting of 50% restricted stock units and 50% performance stock options. Performance stock options vest over the next five years and can only be removed when UMG stock reaches certain thresholds. UMG stock last traded at 29.23 euros ($31.44).
Taking into account other short-term and long-term incentives and benefits, Grainge's total compensation for 2023 is €138,814,000 or $128,264,000 based on a monthly average exchange rate of 0.924.
Shareholder advisory firms were aligned in their concerns about how UMG's pay practices compared with similar companies and argued that the one-time transition award was not sufficiently linked to the company's stock performance.
ISS said Grainge's pay was more than 25 times the average CEO pay from a peer group that included companies such as Spotify and Vivendi.
In its report, Glass Lewis cited a warning published by Eumedion, the Dutch Corporate Governance Forum for institutional investors, which said it was unclear whether the company can rely on social support for the CEO's total remuneration.. .in addition to the shareholders' disagreement expressed at the company's 2023 general meeting.”
UMG said in its annual report that “the year-on-year pay increase is primarily due to the transition to a more performance-based and share-based pay package.”
UMG's stock is up 17% in 2023, “which it believes is indicative of the success of its recent earnings practices in driving value creation,” according to the Glass Lewis report.
ISS also recommended that investors vote against his election Bill Ackmanthe billionaire investor whose Pershing Square Capital Management owns 10.25% of UMG, and also against Cyrille Bollore, Manning Doherty, Catherine Lawson-Hall, James Mitchell and Vincent Vallejobecause the board “does not have sufficient independence among its members”.
