Cablevision Systems Corp. (CVC:US) directors were sued by an investor for wrongfully approving “grossly excessive” compensation for Chairman Charles Dolan and members of his family who serve as executives of the fifth-largest U.S. cable company.
The board of Bethpage, New York-based Cablevision, which includes Dolan’s three daughters, approved more than $80 million in compensation for the firm’s founder and his son over a three-year period starting in 2010 while the company racked up losses, according to a Delaware Chancery Court lawsuit.
“It is impossible to see the payments as anything but grossly excessive and unfair to the company and its public stockholders,” lawyers for Gary Livingston, the shareholder who sued, said in a March 7 complaint filed in Wilmington, Delaware.
The complaint about pay at Cablevision comes as the U.S. Securities and Exchange Commission weighs a proposal to require corporations to disclose how much more their chief executives earn than rank-and-file employees. The pay-ratio disclosures are mandated by a provision in the Dodd-Frank Act.
Livingston’s case is an example of “baseless shareholder lawsuits designed simply to enrich the plaintiff and his lawyers,” Charles Schueler, a Cablevision spokesman, said today in an e-mailed statement. He added that the Dolan family “created extraordinary shareholder value” for Cablevision investors over the past 40 years.
Cablevision fell 1.3 percent to $17.92 at 2:18 p.m. in New York trading. The shares earlier dropped as much as 2 percent.
Cablevision executives said in February that revenue from cable operations in the fourth quarter rose more than 5 percent to $1.4 billion. Cablevision serves about 3 million customers in New York, New Jersey, Connecticut and Pennsylvania.
Cablevision faced complaints about its compensation system last year when executives asked the police to eject shareholders from its annual meeting for objecting to the company’s union-pay policies. Protesters called for the cable provider to pay union workers the same rate as nonunion employees.
Dolan founded the company in 1973, according to the firm’s website. He and other family members hold shares that control about 73 percent of the company’s voting rights. Earlier this month, Dolan and his family were listed on the Forbes 2014 billionaires list with a net worth of $3.7 billion.
Livingston said in the suit that Dolan has turned Cablevision into a family business, with his son James Dolan as the company’s chief executive officer and eight other family members filling board seats. The company has a 16-member board, according to its website.
The Dolans also control Madison Square Garden Co. (MSG:US), a sports and entertainment firm that owns the National Basketball Association’s New York Knicks, the National Hockey League’s New York Rangers, its namesake arena in New York as well as Radio City Music Hall.
“The Dolans treat Cablevision as a family coffer, routinely entering transactions with the company that have improperly favored the Dolan family’s interests over the interests of the company and its public stockholders,” Livingston said the complaint.
Charles Dolan’s daughter Kathleen Dolan earned more than $171,000 in fees for serving as Cablevision director in 2012 without ever attending a board meeting in person, according to Livingston. Other family members, including in-laws, hold “high-paying executive positions,” according to the complaint. The hirings amount to “nepotism run amok,” Livingston said.
Charles and James Dolan were paid more than $41 million and $40 million, respectively, over a three-year-period starting in 2010, according to the suit. Those pay packages were granted at a time when the analysts criticized the cable provider for “substantial underperformance when compared to its peers,” Livingston alleged in the suit.
Last year, Cablevision directors approved an even-more lucrative compensation package for James Dolan, who has been devoting more time to his role as lead singer in his own rock band, JD & The Straight Shot, according to the suit.
“The payments made to James and Charles were awarded through a deficient process and so far exceeded what their services were worth” that they amounted to a waste of corporate assets, according to the complaint.
In 2008, Charles and James Dolan, along with 14 other executives, agreed to pay more than $24 million to settle shareholder suits accusing them of benefiting from backdated stock-option grants as part of their compensation packages.
Complaints about executives’ pay packages prompted Congress to require companies to disclose pay ratios under the 2010 Dodd-Frank law.
The law requires public companies to disclose their CEO’s total compensation as a multiple of median total worker pay. Total compensation under the law includes salary, bonus, stock and option awards, long-term incentive pay, and change in pension value.
Across the Standard & Poor’s 500 Index of companies, the average multiple of CEO compensation to that of rank-and-file workers is 204, up 20 percent since 2009, according to data compiled by Bloomberg.
The case is Livingston v. Dolan, 9425, Delaware Chancery Court (Wilmington).
To contact the reporter on this story: Jef Feeley in Wilmington, Delaware at firstname.lastname@example.org
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