Economy Spares Payrolls — for Now

Cable-industry employees generally fared well when it came to pay increases between March 2007 and March 2008, with the cable-operator workforce receiving an average 5.5% lift in total compensation.

At the same time, cable- and broadcast-network employees received an average 5.2% increase in pay during that time frame, according to the annual compensation survey conducted by management and executive-compensation consultancy Croner Co. for the Cable Television Human Resources Association.

“There were no real surprises this year,” said Hali Croner, president of Kentfield, Calif.-based Croner. “There have been rumblings lately over the financial crisis and lackluster economy. But at this point, we can’t really discern how that is affecting or will affect compensation in the cable sector.

“We do know that between March of 2007 and March 2008, we saw robust growth. It wasn’t huge, but it was substantial.”

Some of the increases this year were more the result of the survey sample, rather than a direct reflection of market pressures, because a few of the smaller cable operators didn’t participate in this year’s compensation survey, Croner said. Corporate MSO workers saw the biggest jump, with an average lift in salary of 7.7%. Sales and exempt individual contributing operator employees experienced the smallest increase, at 2.6%.

At programming networks, director-level employees experienced the biggest lift in salary (6.3%), followed by senior vice presidents (5.5%) and vice presidents (4.9%). The smallest hikes in compensation (2.2%) were for non-exempt, or hourly, employees.

Generally, pay increases at both the participating cable operators and programmers were higher than last year. With some exceptions, the increases also tended to outpace industry as a whole.

According to the U.S. Bureau of Labor Statistics, compensation costs for private industry rose 3% between June 2007 and June 2008, about the same as the 3.1% increase for the year ended June 2007.

Last year, many programmers had to pony up a disproportionate amount of money to lure new-media and engineering personnel, as networks embarked on new businesses and delivery methods. With the convergence of digital media, the demand for engineers and information-technology professionals has risen substantially in the last couple of years, so salaries were increased to attract that talent, Croner said.

In many cases, as overall salaries rose between 3% and 5%, pay for those with engineering degrees went up as much as 10% a year ago. This year, it appears that sector has settled down and Croner saw no big pay spikes.

Companies are constantly revisiting their pay practices, said Charter Communications vice president of human resources Lynne Ramsey, also the president of CTHRA. Poaching from competitors continues to be a problem for some operators in certain markets. When that happens at Charter, for instance, Ramsey said the company immediately investigates where pay levels are and adjusts them accordingly.

“Most of our defections have gone to the telephone company because of the attractive compensation,” Ramsey said. “But I can’t tell you how many of those folks come back to us and we hire them back. Who better to be an ambassador for our company to our employees than the person who has stood on the other side of the fence?

“Salary isn’t the No. 1 reason people stay at a company. They want to be engaged and know that there is a clear career path for them,” she added.

When outside help is needed, contractors often charge more than the salaries of full-time staffers because they aren’t getting any benefits, Croner said. But when those contractors are brought in-house as the businesses expand, it can lead to pressure to lift existing workers’ salaries.

Such situations can be an opportunity, though, Ramsey said.

“We did a total market review of our engineering and IT divisions [after bringing on some contractors full-time],” she said. “We refreshed career paths and cleaned up our structure. We moved people around and adjusted compensation where necessary. It was so successful we have done it throughout the company with similar results.”

Companies that don’t have clear and extensive succession plans for senior executives tend to have to pay more to get outside talent, according to Equilar, a Redwood Shores, Calif.-based compensation data and research firm specializing in executive- and director-level jobs.

An Equilar study released in July found that CEOs hired externally by large-cap, Standard & Poor’s 500-level companies received a median total compensation package of approximately $12.1 million in 2007, or 51.1% more than CEOs with at least two years of tenure, who made approximately $8 million. Internally-promoted CEOs made less than both groups in 2007, pulling in a median pay package of approximately $6.9 million.

With the business maturing and the economy sagging, companies are constantly looking to cinch their financial belts, Croner said. Employers are revisiting their bonus structures and scrutinizing their hiring practies. Some job openings aren’t being filled as quickly, while others aren’t being filled at all, said Ramsey.

Salaries for most sectors on both the operating and programming sides of the business were up, but some MSO sectors suffered when it came to bonuses, the survey found. The actual total incentive awards for operators were 97% of targeted amounts, Croner said.

Corporate bonuses reached 111% of targeted levels, but exempt individual contributing employees — or salaried workers — only received 76% of their targeted incentives, according to the latest salary survey.

Field managers also tended to receive less than their targeted bonuses, according to the data. That could reflect increased competition in the market and slower sales due to a weakened economy, Croner said.

Network employees were just the opposite. The total actual bonus awards for network employees were 106% of the target incentive awards, denoting strong network performance, Croner said. Non-sales employees’ median bonuses were 105% of the target while the median sales award was 115% of the target. The sales total includes advertising, sales solutions, affiliate-sales management and sales force.

Both operators and programmers offer extensive long-term incentives, with 80% of cable programmers and broadcasters offering stock and stock equivalents to selected directors and above, up from 77% who offered such incentives last year. Almost nine out of 10 (89%) offer those incentives to vice presidents and above. The median annual value of those long-term incentive awards ranges from 115% of base salaries for top executives and 30% for directors, Croner noted.

Some 85% of MSOs offer long-term incentives to their employees (up from 75% of participating operators who offered such incentives last year) and 90% of them offer those incentives to directors and above. The median value of long-term incentives — usually stock and stock equivalents —ranges from 380% of base salaries for 20 executives to 20% for managers.

“Both operators and programmers have moved away from stock options to restricted stock,” Croner said. Restricted stock options help companies’ bottom lines “from an accounting perspective,” Croner said. It’s more advantageous for employees, too, because they are getting full shares, not partial shares with options, she added.

With all the recent headlines stemming from executive compensation in the financial sector, it’s worth noting that from 2006 to 2007, median compensation for S&P 500 chief executives in place for at least two years increased by 1.3%, rising to $8.8 million, according to a survey released earlier this year by Equilar. In 2006, median pay for the same group of S&P 500 chiefs was $8.7 million. And despite an increase in median compensation, aggregate compensation (the sum of all pay to all chief executives) fell by 1.9% from 2006 to 2007, according to the Equilar study. Base salaries were up in 2007 (an average 3% for the S&P 500 firms) but bonuses were off (5.9%).

Among cable CEOs, Comcast CEO Brian Roberts brought home total cash compensation of $10.4 million last year. His total equity payout was $6.4 million; other compensation totaled $3.2 million for a total compensation package of $20 million.

Discovery Communications CEO David Zaslav received total cash compensation of $8.8 million last year. He received total equity of $7.2 million; other compensation was $90,000 for a total compensation package of $16.2 million, according to Salary.com data.

Neil Smit, CEO of Charter Communications, received $3.7 million in total cash compensation, $2.5 million in total equity, $20,000 in other compensation for a total compensation package of $6.2 million. Rocco Commisso, chairman and CEO of Mediacom Communications, received a total cash payout of $1.4 million and total equity of $1.1 million for a total compensation package of $2.5 million, according to Salary.com data.