Friday, March 21, 2014

Being a Senior Executive has its Privileges: Time Warner and Apollo Global

Being a Senior Executive has its Privileges:  Time Warner and Apollo Global

Yesterday I figured Mark Spilker, President of Apollo Global, got a great financial payoff for a relatively brief period of service.  Then I read about Robert Marcus, the new Chief Executive Officer at Time Warner.[1]   He’s been in charge for only six weeks and stands to make about $80 million because the company has been sold to Comcast, and his contract has a change-of-control provision vesting all his long-term benefits.  Many will argue that a contract is a contract, and the provisions were negotiated at am arm’s length.   However, Mr. Marcus was previously the COO of Time Warner and was involved the company’s mergers and acquisitions.  You have to suspect that Mr. Marcus and/or members of the board had an idea that a deal of some kind was in the works when they negotiated the contract.    Mr. Marcus was already making tens of millions of dollars a year before his promotion to the top spot.  Meanwhile, the Comcast merger will eventually cost a bunch of lower level employees their jobs.  I bet no one stepped in to protect them. 
 
Mutual Fund Buy Out (1999)
Let’s turn to the less egregious case.  A little more than three years ago, Apollo Global hired Mark Spilker as President of the firm.  As a public and increasingly diverse company, Apollo was looking to hire someone to manage the business.  Mr. Spilker, as the former co-head of Goldman Sachs asset management business, seemed to fit the bill.  His contract called for him to be paid $2 million per year, plus stock and options worth $49 million. 

Yesterday, Apollo announced that Mr. Spilker is giving up his role at Apollo and will not be replaced.[2]  Leon D. Black, Apollo’s chairman and founder, lauded Mr. Spilker’s efforts.  In the press release, Mr. Spilker echoed Mr. Black’s sentiment and indicated that he’d accomplished his mission.  It appears that Mr. Spilker will be leaving with a substantial portion of his incentive package.

There’s something wrong with this picture.  Apollo made a long-term investment in Mr. Spilker by granting him tens of millions of dollars in long-term equity incentives.  They created a major role for him to manage Apollo’s burgeoning financial empire.  Now he’s leaving on friendly terms and the firm no longer needs a President.  It sure sounds to me like there’s more to this story.   However, in the world of private equity and alternative investments there’s almost always enough money to help salve egos and cover up differences.




[1] http://dealbook.nytimes.com/2014/03/20/for-time-warner-cable-executives-billowing-golden-parachutes/?_php=true&_type=blogs&ref=business&_r=0
[2] http://dealbook.nytimes.com/2014/03/20/president-of-apollo-global-management-to-step-down/

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