I have always admired Cathy Hughes, founder of Radio One. She is a trailblazer who had a vision and worked towards it despite the enormous odds that were against her. She literally lived at the station in the early days with her son to help make ends meet, but she never lost sight of her dream. Her fortunes began to change when she revamped the R&B station to a 24-hour talk radio format. Hughes and Radio One went on to own 70 radio stations in nine major markets in the United States. Her son, Alfred Liggins III, serves as CEO and president and Hughes as chairwoman. In January 2004, Radio One launched TV One, a national cable and satellite television network which bills itself as the “lifestyle and entertainment network for African-American adults.” Hughes interviews prominent personalities, usually in the entertainment industry, for the network’s talk program TV One on One. I have to admit that TV One is way better than BET, but it is much smaller and has a way to go. What I admire about her is that in the face of adversity she did not waver but kept steadfast to her goals. So, naturally I was a little appalled at the recent turn of events at the company.
Cathy Hughes and son Alfred Liggins III would see their compensation increased substantially in 2008 despite a steep decline in the price of the firm’s stock. The problem is the company has been struggling in recent years and has had to sell some of its stations. Now comes news that the struggling media giant Radio One has agreed to give founder and chairman Cathy Hughes and her son substantial raises and bonuses as part of new three-year pay packages. Hughes’s salary would increase at least 75 percent, from $427,800 to $750,000 a year, under the pact. She would be eligible for an annual bonus worth up to $250,000, according to an April 18 filing with the SEC.
Liggins would receive $980,000 in salary, a 70 percent increase over the $575,370 he made in 2007, and have the opportunity to match that in an annual bonus, contingent in part on the company meeting certain performance goals. He would be paid a $1 million “signing bonus” because, the Radio One compensation committee said, he has been underpaid for the last three years. Liggins also would be paid $4.8 million to compensate him for losses he incurred when he was forced to repay a company loan to buy Radio One stock several years ago. Liggins received $1.1 million in total compensation in 2007; his mother received $602,252.
Some compensation experts questioned the new pay packages in light of the company’s recent performance. I agree with that. What message are you sending to your shareholders and prospective shareholders? I have come pretty close to purchasing stock in this company, but when I ran the numbers and looked at their bottom line and valuation, I decided to wait it out for a while. Now, I will definitely remain on the fence.
You see, the value of Radio One stock has dropped more than 80 percent over the past year, and the company announced recently that it would sell its Los Angeles station, which operates in the nation’s most lucrative radio market but has struggling to maintain market share. Herein lies a big problem, industrywide, broadcast companies’ stock prices have posted double-digit losses as advertisers shifted their spending to other formats. This is a company where performance is a real issue. When you look at what’s happened to the stock, and pay over a three-year timeframe has been high, there are some red flags here as to whether this makes sense.
In its SEC filing, the company said the increased salaries and benefits were intended to reward performance and bring the compensation packages in line with the industry. “The compensation committee believes that entering into these agreements assists us in retaining our key officers for a certain period of time and focuses the officers’ energies on our business,” the filing said.
Final compensation decisions are to be made by the Radio One board, and salaries could be increased at its discretion, according to the employment agreements. The company is scheduled to hold a shareholders’ meeting on May 28 to vote on retaining Hughes, Liggins and others on the board.
Under the terms of the employment agreements, if the company were sold and either Hughes or Liggins were terminated for any reason, they would get three times their base salary plus the average of their last three annual bonuses, and a pro-rated annual bonus in cash. Under the three-year agreement, Hughes receives 150,000 shares of restricted stock and 600,000 options to buy shares, while Liggins receives 1.15 million stock options and 300,000 shares of stock, subject to vesting requirements and other restrictions. Liggins would also be eligible for a piece of the proceeds from what the agreement terms a “liquidity event” involving the company’s TV One network.
This compensation package seems a little too generous to me. It seems out of the realm of normalcy. An analyst for the Stanford Group has said that “In this day and age of underperforming media stocks, to still vote yourself excessive compensation packages when your shareholders are still losing money seems egregious.” Radio One’s stock lost 17 percent of its value this week, closing yesterday at $1.06. Since last year, when the company’s stock traded at a of $7.59, its value has declined 85 percent.
I have heard Warren Ballentine asking people to invest in black owned businesses, involving Radio One and I have no issue with him on that. The problem with this is the fact that these people have been given such generous raises while the company is obviously struggling. I am well aware that a black owned media company and a white owned media company face a lot of dissimilar issues, but if this company is to survive, they cannot engage in such egregious behavior. We need black owned stations in our communities because they give us news, views and programming that the conventional media would turn a blind eye at. With that in mind, you can’t get continue to raid the piggy bank while it is running close to empty. So, Ms. Hughes, while I respect you deeply and honor you in many ways as being a trailblazer, I must point out that your latest salary package sends the wrong message to your shareholders and is clearly not in the best interest of your company, that you fought so hard to build. Just my thoughts, you be the judge…..
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