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Disney’s Executive Pay Cut Threatens To Deepen the Divide Between The Two Sides Of The Merged Company

Nellie Andreeva
·3 min read

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Shockwaves went through the film and TV community this morning when Disney, one of the biggest media companies in the world, became the first entertainment conglom of that size to implement massive pay cuts related to the ongoing coronavirus pandemic.

It is probably not how the company’s leadership had planned to mark the one year anniversary of the $71.3 billion Disney-Fox merger, which was 10 days ago on March 20. With Hollywood production shut down, theatrical releases on hold and amusement parks closed, Disney’s incoming CEO Bob Chapek this morning announced a salary reduction of 30% for EVPs and above, 25% for SVPs and 20% for VPs “until we foresee a substantive recovery in our business.” Chapek himself is taking a 50% pay cut, while executive chairman Bob Iger will forego 100% of his salary. All reductions are said to apply to base pay.

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The universal formula is poised to create inequality in the cuts’ impact on executives from Disney proper and Fox alums. As Deadline pointed out in the pre-merger story about the challenges blending the two corporate cultures, the companies were sitting at opposite ends of the spectrum as being very generous (Fox) and very conservative (Disney) with their top titles. Heading into the acquisition, Disney had one CEO, Iger, 21st Century Fox had eight. That trickled down to disproportionally more executives at President, EVP and SVP level at Fox than at Disney.

Following the acquisition of Fox assets, the combined company continues to have one CEO, with an influx of new chairmen from the Fox side of the company and a slew of other senior executives with titles that are sometimes higher than their Disney counterparts. In some areas, an EVP on the Fox side and a VP on the Disney side have very similar places in the overall Disney hierarchy.

And while Fox executives came into the merger with higher overall compensation than their Disney counterparts, as we have reported, their base salaries are believed to be lower, with a lot more robust bonus structure. Because of the economic turmoil, no one is expecting bonuses this year, so there are a number of executives on the Fox side of the company who would have to take a larger % cut on a lower or comparable base salary than their Disney counterparts.

It already has been a stressful process trying to close the divide and marry the two very different corporate cultures over the past year; the different size burden executives on each side may have to carry during the health and economic crisis could create more tension and deepen that divide.

For the staffers coming from Fox, the temporary cut would require an amendment to their existing contracts, which would trigger an arduous legal process over the coming weeks.

Also raising eyebrows is the way the % of the pay cuts were distributed. VP, SVP and EVP are consecutive steps on the corporate ladder, each of which comes with a sizable but not exorbitant pay raise. Correspondingly, each level is getting a progressively higher % of salary reduction, 20%, 25% and 30%, respectively. But EVP, President and Chairman level executives, where the range in salaries spans millions of dollars, are in the same bracket, all undergoing a 30% pay cut. Compensation for executives with the same title also varies widely from department to department.

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