Rupert Murdoch collected his usual $US8.1 million ($A9.6 million) fixed pay — meaning that with the exception of Westfield founder Frank Lowy, Murdoch’s fixed salary significantly exceeds the base salary received by any ASX-listed company CEO. While Murdoch ostensibly did not receive a bonus, was paid $US1.7 million in stock, $US4.2 million in deferred earnings and a bizarrely titled $US5.4 million in “Non-Equity Incentive Plan Compensation”. The footnotes to New Corp’s SEC filing note that:

The amounts set forth in the Non-Equity Incentive Plan Compensation column represent the fiscal 2009 EPS Bonus of … Murdoch … Chernin, [James] Murdoch.

Which sounds an awful lot like a bonus.

News Corporate shareholders may reasonably question exactly why Rupert and other senior executives, including former COO Peter Chernin and current CFO David Devoe, would be entitled to any sort of performance-related remuneration given News Corp’s recent performance.

Over the past two years, Murdoch steered News Corp into the boom-time acquisition of Dow Jones (publisher of the Wall Street Journal) which has subsequently led to the company writing off more than $US2.8 billion of the $US5.6 billion purchase price. What that means is that Rupert spent almost $US3 billion too much buying as asset at the wrong time by completely misjudging the effect of the global financial crisis on advertising revenues. News Corp also suffered a significant downturn along with all other media business last year, leading to a $US203 million loss for the June 2009 quarter, based on revenues of $US7.7 billion. Meanwhile, News Corp shares at currently trading at about $15 – the same level as 1999 (the share price had dropped as low as $6.26 in February).

That Murdoch could be paid a bonus in light of New Corp’s performance in recent years is remarkable. Although not quite as remarkable as the company’s attempt to justify the payments of the so-called performance bonuses; the company’s Notice of Meeting, ironically noted:

The Compensation Committee believes that a significant portion of a named executive officer’s total compensation opportunity should be “at risk” based upon the Company’s performance to foster a performance-driven, pay-for-performance culture that aligns our named executive officers’ interests with those of our stockholders and rewards the named executive officers for superior results.

Yes, that would be those superior results that delivered a collective
$US8.4 billion write-down earlier this year.

In case you’re wondering how the News Corp board managed to justify the bonus payments to executives, notwithstanding the horrendous financial performance (largely inflicted by those very executives’ lapses of judgment), it was due to the somewhat convenient use of the magical “adjusted EPS” to determine bonuses. News Corp stated:

Adjusted EPS is used because the Compensation Committee believes that it provides a better evaluation of the Company’s operating performance, as the adjustments take into account specific events that may distort the Company’s performance in a specific performance period.

The real benefit (to executives) of “adjusted EPS” to judge performance is that it happens to ignore other minor matters such as “Non-cash intangible asset impairment charges and write-downs on investments to realisable values” or items classified as “extraordinary items” (these naturally, are almost always bad for shareholders). That means News Corp’s write-down of its Dow Jones business, which cost shareholders literally billions of dollars and was caused by errors committed by management is specifically excluded when it comes to paying those very same managers’ bonuses.

Even excluding the extraordinary items, if News Corp’s EPS falls, Murdoch is still paid a bonus of between $US4 million and $US5 million — rarely would you find a more explicit reward for failure. (If News Corp is able to increase EPS by 40%, not unthinkable if the economy rebounds, Murdoch is eligible to receive a bonus of $US25 million).

Further, the News Corp remuneration committed felt it appropriate to pay Rupert’s EPS bonus in cash, rather than shares, on the ground that Murdoch’s “interests were already significantly aligned with those of our stockholders and that it is unlikely that he will leave the Company during his working career”.

Rupert’s “other compensation” also included use of the company’s corporate aircraft, valued at $US358,712. James Murdoch was a slightly less voracious flier, racking up a $US219,538 tab.

As a final slap to shareholders, James Murdoch, News Corp’s CEO of Asia and Europe, collected $US9.2 million. No doubt, James’ role at the company is solely due to his skill as an executive, and had nothing to do with his surname.

News Corporation’s Remuneration Committee is chaired by long-time News Corp director, Andrew Knight (who has been on the board since 1991 and would no longer be deemed independent by most governance groups). Also on the committee that determined Murdoch’s pay is “Teflon” Rod Eddington. Eddington was recently a director of Allco, which collapsed last year and is understood to be currently under investigation by ASIC. Eddington was also on the board of Rio Tinto, which completed the near destructive acquisition of Alcan last year.