Shares in Insight Communications ( ICCI) had the worst performance of all U.S. cable stocks last year. But that didn't put a damper on executive salaries at the cable operator.CEO Michael Willner received a total of $852,900 in salary and bonus in 2003, up 18% from 2002, Insight reported in a Securities and Exchange Commission filing Friday. Willner also received a raft of restricted stock that, at the time it was granted, was worth an additional $328,000 per year over five years. Such generosity to Willner -- who co-founded Insight and owns 8.2% of its voting shares -- comes despite Insight's dismal performance relative to other publicly traded cable operators. Insight's shares fell 18%. The only other operator to have a down year, Mediacom ( MCCC), fell just 2%. All of the other non-bankrupt cable stocks, such as Comcast ( CMCSA) and Cablevision ( CVC), were up in the range of 21% to 40%, while Charter's ( CHTR) stock, emerging from a near-bankruptcy experience, more than tripled. The discrepancy between Willner's salary and Insight's stock reflects the difficulty of matching a stock's performance to executive compensation. It also points to the broad leeway a company's board has to pay executives as it sees fit. The stock's decline likely reflects increasing concern about the company's vulnerability to competition from satellite TV services. But Insight's financial performance improved from 2002 to 2003. Shares in Insight were trading at $10.03 Monday, down 3% from their 2003 year-end close. Willner's 2003 compensation comprises a base salary of $577,900, up 3% from the prior year, and a bonus of $275,000, up from $165,000. Willner, who received 100,000 Insight stock options in 2002, received 170,000 shares of restricted stock in 2003. Those shares -- worth $1.6 million when granted and deliverable upon the termination of Willner's employment -- vest over five years, with the first portion vesting in November 2004.
In Insight's proxy statement filed with the SEC Friday, Insight's compensation committee -- composed of four independent directors -- indicates the flexibility it has in setting compensation for Willner and other executives. "Insight's compensation program is designed to attract, motivate and retain highly skilled and effective executives who can achieve long-term success in an increasingly competitive business environment and whose services Insight needs to maximize Insight's return to stockholders," the committee reports. "The annual performance evaluation of each executive officer is subjective, relies heavily on the performance evaluation of management, and not upon an exact formula for determining the relative importance of each of the factors considered, nor is there a precise measure of how each of the individual factors relates to each executive officer's ultimate annual compensation." In determining the restricted stock award for Willner, the committee reports that it "approved an award of restricted shares of the amount necessary to bring his total direct compensation opportunity (the sum of base salary, target annual incentive and long-term incentive value) to the 75th percentile of market total direct compensation levels." Insight reported $902.6 million in revenue last year, up 11% over the prior year; operating cash flow grew 9% to $387.1 million. Average monthly revenue per basic customer was up 11% to $58.03. A different approach to executive compensation is revealed in the proxy statement filed with the SEC Monday by EchoStar Communications ( DISH), though CEO and co-founder Charlie Ergen isn't exactly suffering himself. With shares up 53% in 2003, Ergen's base salary rose 13% to $284,000. But instead of a $375,000 bonus last year, Ergen -- who holds 91% of EchoStar's voting stock -- received stock options, vesting over 5 years, worth between $1.8 million and $4.6 million, according to estimates in the proxy. Ergen also received $91,000 in other compensation, including 401(k) matching contributions, tax preparation fees and personal use of company aircraft. "Annual base salaries paid to EchoStar's executive officers have historically been at levels significantly below those generally paid to executive officers with comparable experience and responsibilities in the telecommunications industry," says EchoStar's compensation committee. "Because of these relatively low levels of compensation, EchoStar may experience difficulty in attracting and retaining executives at the highest performance levels."