David Zaslav WBD-Paramount payout highlights CEO ‘golden parachutes’
Warner Bros. discovery CEO David Zaslav’s potential payout of more than $800 million from the Paramount Skydance deal highlights an obscure tax rule originally designed to cap CEO pay.
Zaslav could collect hundreds of millions of dollars in severance and other stock awards and payouts following Paramount’s acquisition of WBD, according to SEC filings. The payments include approximately $500 million in stock awards, approximately $115 million in vested stock awards and $34 million in cash, according to the filing.
The deal also includes a potential payment of up to $335 million to Zaslav for what is known as a “golden parachute” excise tax. The tax was first created by Congress in the 1980s to limit very large payouts to top executives in the event of a change of control or sale of their companies. The 20 percent tax kicks in when an executive’s pay exceeds three times his normal base salary and target annual bonus.
As part of the acquisition, Paramount agreed to pay Zaslav’s excise tax if his other payments triggered the tax. The payback decreases over time, dropping to zero if the deal closes in 2027. Paramount said it aims to close the deal by this fall, pending regulatory approval.
Paramount’s board of directors said the refund would be paid by Paramount, not Warner shareholders.
Without payment, known as a “gross raise,” the board said, “Mr. Zaslav will be at a significant disadvantage in terms of excise tax exposure compared to the previously proposed transaction.” netflix,” which did not include the golden parachute tax.
Zaslav’s earnings from the agreement are expected to be around $667 million, excluding taxes.
Instead of capping pay, golden parachute rules encourage CEOs to sell their companies and seek higher rewards, management experts said. The tax also led companies and their shareholders to spend more to pay special taxes.
“Over time, golden parachutes have become increasingly lucrative, in many cases becoming platinum, especially as executive compensation has shifted radically toward stock-based compensation,” Jeffrey Gordon, co-director of Columbia Law School’s Ira M. Millstein Center for Global Markets and Institutional Ownership, wrote in an article. he wrote. “While there may be bitterness among those laid off when the firm is sold and layoffs occur, there is clearly one winner: the CEO with the golden parachute.”
Correction: Paramount Skydance, Warner Bros. It buys Discovery. A previous version of this story mischaracterized the agreement.
