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Media companies seek to hide stars’ pay

Some big media and entertainment companies are  challenging a Securities and Exchange Commission proposal that would require them to disclose the perks and income of their stars and celebrities.
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A Securities and Exchange Commission proposal that would disclose stars' pay is being called the "Katie Couric clause."Brad Barket / Getty Images file
/ Source: The Associated Press

Some big media and entertainment companies hope to keep under wraps the perks and income of their stars and celebrities, challenging a Securities and Exchange Commission proposal that’s being called the “Katie Couric clause.”

The SEC proposed the rule in January as part of an initiative to require companies to disclose far more details about their executives’ pay packages and perks.

The biggest changes since 1992 in rules governing disclosure of executive compensation are aimed at addressing a source of shareholder wrath.

The regulation in question would require a company to disclose the pay details of as many as three non-executive employees whose individual compensation exceeds that of any of its top five executives.

TV personalities, professional athletes and other celebrities who are employees of public companies could be affected. Their pay packages often have confidentiality clauses. Under the current system, companies must disclose only the compensation of the chief executive officer and the next four highest-paid executives.

The highly paid non-executives would not have to be named, but critics say that since their positions in the company would have to be described, the public — and competitors — could easily figure out who they were.

The proposal was opened to a public comment period, which ended Monday, and could be formally adopted by the SEC in time for the spring company proxy season next year.

One of those objecting is Jeffrey Katzenberg, one of Hollywood’s most prominent producers, who is the chief executive of DreamWorks Animation SKG Inc.

The proposed rule “represents a marked departure from the (SEC’s) long-standing policy of not requiring disclosure of non-executive employee compensation,” he wrote in his comment letter to the SEC dated April 6. If it were adopted, Katzenberg wrote, it would: “Invade the privacy of employees; reveal confidential and proprietary information to the company’s competitors and thus jeopardize the company’s ability to retain key employees; cause significant employee morale issues, and provide investors with information of limited value.”

DreamWorks was recently acquired by Viacom Inc., an entertainment conglomerate that also owns the Paramount film studio.

Viacom and four other big media companies on Monday filed a letter with the SEC maintaining that the compensation information should be treated as a trade secret. Joining Viacom in the letter, which was first reported by The Wall Street Journal in Monday’s editions, were CBS Corp., The Walt Disney Co., NBC Universal and News Corp., which owns the Fox broadcast network.

The SEC proposal “would prove especially challenging to companies in the entertainment industry,” the letter says. “It is not uncommon for ’talent’ (as this term is commonly used in the media and entertainment industries, including professional athletes) to have various employment relationships with a company covering a range of projects.”

In some cases, the employee in question may partly or fully own a production company or other business that has a relationship with the larger company, and producers, writers and directors often have profit-sharing arrangements with companies, the letter noted. Sometimes “talent’s” compensation is tied to a movie or recording that has not yet been produced.

For entertainment companies, “there is a meaningful risk that disclosure would result in competitive harm or otherwise prejudice their interests,” the letter says. “Existing pay packages with non-executive officers were not structured with an eye to public disclosure.”

Couric recently agreed to leave NBC’s “Today” show and anchor the CBS evening news, at a reported salary near her current range of $13 million to $15 million annually for five years.