Suggestion For Warner Music: Maybe Look At How Much You're Paying Your Execs

from the might-save-some-money dept

Mon, Jun 1st 2009 6:22pm — Mike Masnick

It's no secret that Warner Music has been struggling -- employing a highly questionable strategy of shutting down or suing all sorts of useful services that make its music more valuable, and then demanding ridiculous payment terms or equity in any company that might help them survive... all while the company slowly goes bankrupt. Following what can only be called a disastrous 2008, the company has shown a minor improvement in 2009, but it has all the indications of a dead cat bounce. The company was in desperate need of cash, and was able to get a loan of $1.1 billion last week to ease some of those concerns... but at a staggering 9.5% interest. Meanwhile, the guys over at Hypebot are wondering why WMG's top two executives were given $6.25 million in bonuses last year as the company was collapsing. And with some back of the envelope calculations, they note that the company could save hundreds of millions of dollars by dropping the bonuses and using the money to pay back the debt earlier, saving on some of the massive interest payments that are on the way.

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Filed Under: bonuses, debt, edgar bronfman jr.
Companies: warner music group

26 Comments

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Anonymous Coward, 1 Jun 2009 @ 6:32pm

i was on a bands website today and found a dead link to a youtube video, care of warner. my guess is that they're actively trying to kill their own industry so the execs can loot the corpse.
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Steve R. (profile), 1 Jun 2009 @ 6:40pm

Cut Executive Pay, You Must be Joking
Performance is irreverent under American capitalism. Companies claim that must pay the "best and brightest" the highest possible retention bonuses to keep them on-board. To paraphrase the endless ads of the companies that promise to fix your credit, "Its not your fault that you can't run the company".

The financial meltdown has demonstrated that pay for performance is a farce. Our corporate executives seem to believe that their companies are fiefdoms to be stripped of all value for management's own private gain.
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- hegemon13, 2 Jun 2009 @ 12:44pm
  
  Re: Cut Executive Pay, You Must be Joking
  I think you mean "irrelevant," not "irreverent."
  
  In addition, what is farcical about paying for performance? That's the way it SHOULD be. It is the current system, which pays huge sums to executives regardless of performance, that is the problem.
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Anonymous Coward, 1 Jun 2009 @ 7:05pm

Would you just prefer that they all got really big salaries regardless of the outcome? Hundreds of millions in bonuses? I find that rather hard to believe, unless you are down counting things like salesmen's quote bonuses and things like that. If the top dudes only got 6.25 million and you think that is high, then there must be, what, 20+ top dudes all getting the same?

*error* numbers failing to add up.
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- Drawoc Suomynona, 1 Jun 2009 @ 7:26pm
  
  Re:
  The hundreds of millions come from the use of bonuses (to all top tier management) to pay off high interest loans.
  
  *error* You are a rock.
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  - Anonymous Coward, 1 Jun 2009 @ 8:11pm
    
    Re: Re:
    *error* - the numbers aren't exactly adding up - I might have missed something, I don't do loan calcs all the itme, but:
    
    Even if we take the 6.25 million for each of 7 years, and stack it all up on day 1 (to make the math easier), you are reducing the principal only 43.75 million. At 9.5% compounded annually, we are only talking about 75.5 million off the total payment scheme. I think the guy doing the numbers is double dipping, counting the payments not made in the 7th year, because the 43.7 million isn't enough to get rid of a full year of payments - maybe only half of a year at best, and that assumes it is all dumped in there on day one reducing principal.
    
    Someone else want to look and see where I screwed this up?
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    - Anonymous Coward, 2 Jun 2009 @ 12:09pm
      
      Re: Re: Re:
      Find a bank that compounds annually. Hell, find a bank that compounds monthly. You might find out that does daily, but usually its probably compounded continuously.
      
      Also, that 6.5 million occurs annually, not just once. He's saying if you take that bonus *each* year and use it to pay off debt.
      
      Then do the math.
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Ryan, 1 Jun 2009 @ 7:16pm

Having worked at a large company, many execs get to determine the metric by which their bonuses are given. They always choose something totally irrelevant that would be impossible to hit so they're guaranteed it by contract.

I've actually seen companies where bonus is determined by such things like "averaging 38 hours of work per week"
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Anonymous Coward, 1 Jun 2009 @ 8:03pm

its awful what they're doing but i know i have a hard time believing that most people wouldnt do the exact same thing in their position. i know i would. half of 6.25 million is a LOT of money.
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Anonymous Blogger, 1 Jun 2009 @ 8:03pm

Meh
The recording companies have had, what... over 10 years to fix their model and profit from the Internet? This is the perfect time for smaller indie labels to profit from their embracive hold of the Internet model.
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- Anonymous Coward, 1 Jun 2009 @ 8:12pm
  
  Re: Meh
  How do you "profit" from the internet, when the internet says "give it away for free"?
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  - Anonymous Coward, 1 Jun 2009 @ 9:19pm
    
    Re: Re: Meh
    By promoting tangible products with value which you can sell dummy.
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  - Marcel de Jong (profile), 2 Jun 2009 @ 3:31am
    
    Re: Re: Meh
    Free does not equal no business model.
    
    There are ways of making money via use of the internet, just ask Jonathan Coulton, if you want a real-world example.
    He used to be a software developer, who created some geeky music for fun, now he is a fulltime artist that can support his family with it.
    All by giving away his music for free.
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    - Vanye (profile), 2 Jun 2009 @ 10:20am
      
      Re: Re: Re: Meh
      Not all of his music is given away for free. He's got a good attempt going, though. Give away some of it, hope people will pay for more of it, and give shows where you know people will show up.
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      - Anonymous Coward, 2 Jun 2009 @ 12:13pm
        
        Re: Re: Re: Re: Meh
        He's admitted that you can get all the music for free. He also admitted that he made it kinda difficult to do that and made it really easy to purchase it. However, you can get all of his music from his website for free (and i literally mean *from* his website, not from piratebay). A lot of the music is even released under creative commons anyway. They can't be resold, but they can be re-used in almost any works as long as it isn't sold.
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  - Mechwarrior, 2 Jun 2009 @ 6:01am
    
    Re: Re: Meh
    You know, by making services that people do want to pay for. Or is that so hard for you to understand?
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Kelly Brown (profile), 1 Jun 2009 @ 8:58pm

My goodness... I would be happy with $10 million. I could live off of $100,000 for the next 100 years. Darn straight, give those execs a pay cut! No one's work is worth THAT much.
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iyogi (profile), 1 Jun 2009 @ 9:15pm

RE:
I've actually seen companies where bonus is determined by such things like "averaging 38 hours of work per week"
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Anonymous Coward, 1 Jun 2009 @ 9:18pm

Warner Music struggling? Oh you mean those idiots who removed all their music videos from YouTube and then expected the 'new music' purchasing generations to buy music they publish? Interesting. Who would have thought making consumers want you bankrupt would be a bad thing.
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Anonymous Coward, 2 Jun 2009 @ 12:15am

they could have been saving, but banks don't make any money that way.
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JBB, 2 Jun 2009 @ 2:20am

*gasp* 9.5%?!
9.5%?! That's ludicrous! Struggling businesses usually get much worse rates than that. :P What's the going rate for getting funding from a venture capitalist? Oh, right, they get the majority share of the business. Yeah, 9.5% is awful. *rolls eyes*
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- Mike Masnick (profile), 2 Jun 2009 @ 9:44am
  
  Re: *gasp* 9.5%?!
  9.5%?! That's ludicrous! Struggling businesses usually get much worse rates than that. :P What's the going rate for getting funding from a venture capitalist? Oh, right, they get the majority share of the business. Yeah, 9.5% is awful. *rolls eyes*
  
  Uh, the difference between equity and debt is a LOT bigger than what you make out. You're comparing apples and airplanes.
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anymouse (profile), 2 Jun 2009 @ 3:46pm

It's all in the definition
If a company is needing to borrow a BILLION dollars just to survive, then how can they really justify any bonuses? The problem is that the bonus isn't usually tied to the same metrics that we would think of when we wonder how the company is doing.

When looking at company performance we may look at things like the debt/equity ratio, current year profits, price/earnings ratios, etc.

When Exce's are designing bonus plans, they make sure they aren't tied to any 'real' figures, but to more abstract things like: Provided a strong face for the company (ie. actually attended all 4 board meetings this year, bigger bonus for actually being sober at all 4 meetings...), Made a suggestion for saving the company money (ie. sack all first year employees), and Improved Management morale (ie. Hired a cute intern to provide 'reach around' assistance in the Executive washroom, received additional 'personal bonuses' from all managers caught using the service in exchange for not sharing the info with their 'significant others').

Is my tin foil hat too pointy today?
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Brian, 2 Jun 2009 @ 3:53pm

People are not fully committed to the future well being of the company. They just care about the now. Can we get cash now? Can we get paid.. now?
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Anonymous Coward, 7 Jun 2009 @ 11:48pm

"...at a staggering 9.5% interest."

I'd kill to have a rate that low on my credit card.
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