Universal Music chief executive Lucian Grainge is under pressure from shareholders over a $100mn pay deal that has been criticised as “excessive”.
Two top-25 shareholders told the Financial Times that the pay package was too generous. The two biggest shareholder advisory services, Institutional Shareholder Services and Glass Lewis, have also warned ahead of the company’s annual meeting next month that his pay package should be rejected by investors.
Grainge, who joined the record industry as a teenager and worked his way up to the most powerful position in music, has been widely praised for his role in resurrecting the business over the past decade.
Known for his close relationship with artists such as Mick Jagger, Elton John and Taylor Swift, Grainge grew up in North London and in 2016 was knighted by Queen Elizabeth II.
As part of a new pay deal announced last month, ISS and Glass Lewis estimated a “transition award” could pay Grainge up to $100mn, with $50mn that depends on him staying at the company and the other half paid based on share price performance.
Grainge is also paid a $5mn salary, as well as annual and long-term bonuses.
Universal Music, which is listed in the Netherlands and headquartered in Los Angeles, has a binding vote on Grainge’s 2023 pay scheduled at the company’s May 11 annual meeting.
Glass Lewis said it “has severe reservations” about the pay package. “The company has failed to implement a remuneration strategy that adequately aligns executive pay with performance,” Glass Lewis said in a report this month. ISS also criticised the 2023 bonuses as “excessive.”
Grainge joins a host of other media chief executives who have come under scrutiny for their pay, including Disney’s Bob Iger and Warner Bros’ David Zaslav. ISS last year slammed a $247mn pay package for Zaslav. A majority of Walt Disney shareholders in 2018 voted against a pay deal for Iger totalling more than $100mn.
Universal, the world’s largest music company and home to singers including Drake, Taylor Swift and BTS, went public in 2021 and enjoyed a jump in its share price. Grainge earned a $140mn payday after the initial public offering. But Universal’s share price dropped in 2022 alongside a broader stock market downturn. UMG shares are down 10 per cent over the past 12 months, while the S&P 500 index has lost 4 per cent and Spotify shares have climbed 26 per cent.
The part of the “transition award” linked to stock performance pays out in three tranches: the first if the shares hit €26.50, the second at €30.00 and the final one at €38.00. Shares in Universal closed at €21.02 on Tuesday.
Bank analysts have broadly been supportive of Grainge’s leadership and his contract renewal. “While he will remain one of the best-paid executives in the space, we are encouraged by the fact that his incentives are now much better aligned with shareholders,” Bank of America analysts said. BNP Paribas said the contract was “a small positive”.
But two top-25 shareholders said the pay was too high and should be addressed by the board. One of the critical investors, however, suggested it was a wider industry problem, describing the package as “egregious, like all media companies”.
“At least it’s not cash anymore so it’s a better alignment,” the investor added. “We need the stock to work.”
In announcing Grainge’s new contract, chair Sherry Lansing said UMG’s board was committed to maximising shareholder value. “Only the right kind of chief executive can help achieve that goal, and Lucian is just the one to do it,” she said.
Both ISS and Glass Lewis also recommended Universal shareholders vote against Grainge’s 2022 pay. ISS described it as “excessive” because it was 12.4 times higher than the median of peer companies and said Universal offered limited responses to shareholders after “significant dissent” to pay in 2021.
More than a quarter of Universal’s shares are controlled by French media giant Vivendi, which owns 10 per cent, and Vivendi’s billionaire controlling shareholder Vincent Bolloré, who owns another 18 per cent. Activist investor Bill Ackman’s Pershing Square bought a 10 per cent stake in Universal in 2021.
Additional reporting by Anna Nicolaou
