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Malone could receive $120 million

Liberty chief's benefit package called 'excessive'

By Jeff Smith, Rocky Mountain News (Contact)

Published June 4, 2008 at 6 p.m.

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Liberty Media Chairman John Malone would enjoy severance benefits totaling roughly $120 million if he were to leave the company, according to the communications giant's proxy statement.

One reason for the large package is that Malone, 67, has deferred some of his pay since 1983, when he headed Tele-Communications Inc., or TCI.

But the severance accounts, which Liberty inherited after TCI was acquired by AT&T in 1999, also are growing in value rapidly because two are pegged to double-digit interest rates.

The shareholder advisory firm Proxy Governance says the severance benefits are simply too generous and has recommended votes be withheld for two directors/compensation committee members up for re-election.

"While we recognize this agreement was assigned to the company, we believe that the compensation committee should take steps to address the excessive benefits to which Malone is entitled," Proxy Governance says in its report in advance of Liberty Media's annual shareholders meeting Friday.

In its argument, Proxy Governance cites two other concerns about Malone's compensation.

In 2007, Liberty Media doubled his personal expense allowance covering such things as tax planning and the use of the company's airplane from $500,000 to $1 million a year.

Malone also continues to receive stock awards every year, Proxy Governance notes, "even though he maintains a significant equity stake in the company."

It's unclear whether the concerns will be aired by shareholders at the annual meeting, which is scheduled for 9 a.m. Friday at the Denver Marriott South at Park Meadows.

Liberty Media spokesman John Orr didn't return a reporter's phone call for comment.

Two other leading shareholder advisory firms - Glass Lewis & Co. and RiskMetrics, formerly Institutional Shareholder Services - haven't made an issue out of Malone's severance benefits and recommend that shareholders vote for all Liberty directors up for election.

Those firms do express concern about Liberty Media's board makeup, saying it should include more independent or outside directors.

Malone's employment agreement was amended in 1999 to provide for an annual salary of just $2,600. But he also receives annual equity awards and perks worth several millions of dollars a year.

Two deferred compensation programs are at issue.

The original agreement, signed in 1982, enabled Malone to set aside part of his pay and earn an annual interest rate of 13 percent, par for the course back then but now way above market rates.

If Malone were to leave the company now, he would be entitled to 240 consecutive monthly payments of $73,720, plus interest.

The account continues to grow at 13 percent annually, propelling the sum of those monthly payments to $71.6 million, according to the company's proxy statement. The final monthly payment, for example, would top $800,000 including interest.

A deferred compensation arrangement struck in 1993 lowered the annual interest rate to 8 percent. That severance benefit is estimated at $5.1 million.

Malone also has a termination of employment agreement worth $31 million, entitling him to payments of $129,192 a month for 20 years. That account is growing at a 12 percent annual interest rate.

Other benefits push Malone's total severance package to roughly $120 million, varying slightly depending on the situation of his departure.

smithje@RockyMountainNews.com or 303-954-5155

Comments

  • June 5, 2008

    9:40 a.m.

    Suggest removal

    Logical writes:

    Mr. Smith,

    Why are you concerned about his compensation package? The tone of your writing indicates you agree with Proxy Governance that Malone's package is excessive. Why do you liberals dislike others generating wealth for themselves?

    Mr. Malone has put most of his life into his job. Being a CEO is not a 40, 60, or even 80-hour a week job. It is a constant job, no matter what he is doing. Late nights, weekends, during his "vacations"; any time anyone needs his input, he is available. So what if he negotiated a good retirement package? His salary is only $2,600 per year. He was smart in the way he structured his income, and it was all approved by the board.

    Oh, yes, he also started the company that has become Liberty. Does that not entitle him to some financial benefit when he retires?

    Drop the envy of executives' income, and work to achieve the lifestyle you want, and can earn. Your article serves no purpose other than to incite other envious liberals to complain that Mr. Malone has been "too successful".

  • June 5, 2008

    10:34 a.m.

    Suggest removal

    jacka writes:

    So what Jeff Smith, he founded the firm and owns a ton of it. Logical is right, Jeff Smith is winer and fails to effectively promote the good factors of the Colorado business climate and its businesses.

    Jeff is probably against Right-to-Work too.

    Why do the owners of this paper give every good story-issue set to reporters like Andrew Voung? Because they are good reporters no driftless puds like Smith.