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

from the might-save-some-money dept

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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Companies: warner music group

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

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Steve R. (profile) says:

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.

Anonymous Coward says:

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.

Anonymous Coward says:

Re: 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?

Anonymous Coward says:

Re: 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.

Ryan says:

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”

Marcel de Jong (profile) says:

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.

Anonymous Coward says:

Re: Re: Re:2 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.

Mike Masnick (profile) says:

Re: *gasp* 9.5%?!

9.5%?! That’s ludicrous! Struggling businesses usually get much worse rates than that. 😛 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.

anymouse (profile) says:

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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