Washington Post - Guild NewsMay 21, 2002
Don Graham’s Salary Freeze –and Yours Donald E.Graham, chief executive officer and chairman of the Washington Post Co., has had the same salary since becoming CEO in 1991. And in the context of his peers in the publishing industry, Graham’s annual salary is a relatively modest $399,996. Guild-represented employees at The Washington Post newspaper also face the prospect of a salary freeze this year. In collective bargaining, the company again is proposing no wage increase during the first year of a three-year contract (with a lump-sum payment instead). But unlike Graham –- whose base salary has remained static at his “continued request, for personal reasons,” according to the company –- the Post’s 1,450 Guild-covered employees have not asked for a wage freeze. Nor, apparently, have other top executives at the Post Co., who over the past several years have enjoyed annual raises, without exception, ranging from about 5 percent to 40 percent. In the executive realm, of course, salary is only one piece of the compensation pie.
Adding Up the Extras With its multi-layered system of bonus, incentive, stock award and stock option plans, the company virtually guarantees every top executive at least one extremely sweet payday each year, above and beyond salary. There was a bit of belt-tightening last year –- no annual bonuses were granted to the top execs, as the company “failed to meet its budgeted earnings per share goal.” Still, all five got something extra, either in cash or options. Even in the case of Graham, who waived participation in the annual bonus plan and does not receive stock options, the $400,000 payout last year under the “long-term” incentive plan equaled his salary. (In 1999, his payout under the long-term plan exceeded $850,000.) For the four other “most highly compensated” executives last year, salary plus long-term incentive payments totaled $688,596 for John B.Morse Jr., vice president and chief financial officer; $554,796 for Beverly R.Keil, now-retired vice president for human resources; $491,946 for Diana M.Daniels, vice president and general counsel; and $411,250 for Gerald M.Rosberg, vice president for planning and development. The newest member of this exclusive club is former Newsweek managing editor Ann L. McDaniel, who succeeded Keil in September. In addition to a salary just shy of $250,000, she got an option for 1,000 shares of stock at an exercise price of $517. (On Friday, Post stock closed at $625, not far off its 52-week high of $634 in April.) In retirement, too, Post executives can expect some extras. Because federal law limits pension benefits under tax-favored plans, the company in 1989 adopted a Supplemental Executive Retirement Plan, or SERP, “to offset these limitations.” The SERP has a defined benefit component –- based not just on salary, but also bonuses for top execs -– and a defined contribution or savings component, in which the company matches executive contributions with credits. The supplemental savings element (in which Graham also does not participate) functions in effect as a sweetener to the 401(k) plan, which likewise matches executives’ contributions. What this means, for example, is that an executive with $500,000 in “covered compensation,” retiring at age 65 after 25 years of service, can expect a supplemented annual pension of about $222,500. Lumps for Some, Luxury for Others The lump-sum scheme proposed by Post negotiators for the Guild contract, in contrast, would not count this “bonus” toward employees’ future retirement benefits. And although the company’s bargainers are quick to draw parallels with other labor contracts when it suits their purpose, the fact unmentioned by them is that lump sums are an anomaly outside The Post. The Bureau of National Affairs, an independent publisher of specialty newsletters and research, recently analyzed 822 contracts settled last year and found lump-sum payment provisions in only 9 percent. This compared with 11 percent in 2000 and 13 percent in 1999. BNA also reported that only 5 percent of the contracts settled last year contained a wage freeze. As noted, none of the Post Co.’s top execs, Graham excepted, has faced a salary freeze in the last three years. In fact, only once in the last decade has any of the “most highly compensated” executives failed to get an annual salary increase (Martin Cohen, vice president, in 1994). And only once in the last decade has any of these executives failed to get a bonus, stock award or other substantial extra on top of salary (Graham in 1996). There’s another way to look at the lump-sum proposal now on the table -– $1,100 for full-time employees, $850 for part-timers. In the gross aggregate, these one-time payments would be worth about $1.5 million. That’s roughly what Graham and Morse got last year, combined, in salary and long-term bonuses. And it’s less than half of the $3.2 million tally for the top six –- Graham, Morse, Keil, Daniels, Rosberg and McDaniel –- even in a year when these executives went without the standard six-figure annual bonuses. But the company’s lump-sum offer to the Guild is dwarfed even further by the bonanza enjoyed in 1999 by Alan G.Spoon, who resigned as Post Co. president early the next year to join a venture capital firm. Spoon netted $17.4 million in 1999 -– the year our last contract was settled -– by exercising options on 63,000 shares of Post stock. Spoon also received options on 10,000 shares that year, when his other compensation totaled more than $1.9 million. Add it up: One man’s 1999 windfall was more than 12 times what the company is now offering to spread among 1,450 people in the Guild bargaining unit this year. And two years before that, Spoon’s total compensation exceeded $6 million -– about four times the gross value of the proposed lump for all Guild -- covered workers. Margin Mystery Appearing April 7 on the C-SPAN program “Booknotes,” Post Executive Editor Leonard Downie Jr. discussed “The News About the News,” co-written with Post Associate Editor Robert G.Kaiser. The book is highly critical of publishing executives who sacrifice quality journalism for the bottom line. Asked by host Brian Lamb, “What is the margin for The Washington Post?” Downie replied: “It’s in the neighborhood of 20 percent each year. Sometimes it’s higher, sometimes it’s lower, depending on the -– how good the advertising sales are that year. Newspapers generally average around 20 to 30 percent profit margins, and sometimes higher.…Your average manufacturing company is very happy to make 5 to 10 percent profits. “And as a result, I think the news media have room to spare in their profit margins. I want The Post to be very profitable. That is what pays for high quality journalism. And I want other news organizations to be profitable to pay for high quality journalism. But I want them to plow some of those profits back into the newsroom, as The Washington Post does.” The Post Co.’s public financial statements, which show the overall newspaper division with a pre-tax operating margin of 10 percent last year, do not specify the profit margins for The Post newspaper. Asked at the bargaining table to supply this information, company negotiators would not. CEO Graham, asked about the newspaper’s margins at the annual stockholders’ meeting May 9, likewise said the company did not break out this information.
-- Keith Sinzinger, Post Foreign Desk
Fruits of Your Labor I: Post Profits in Perspective -- As another round of collective bargaining between the Newspaper Guild and The Post draws near, Guild member and Foreign Desk editor Keith Sinzinger takes a look at the Post's bottom line. First in a series. Fruits of Your Labor II: Who's Optimistic? -- Guild member and Foreign Desk editor Keith Sinzinger takes a look at spending, acquisitions and allegations of illegal conduct by the Post. Second in a series.
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