How to answer the Jill Abramson equal pay question

By Steven Brill
May 16, 2014

abramson

With the firing of New York Times Executive Editor Jill Abramson last week, a dispute broke out over whether her ouster by publisher Arthur Sulzberger Jr. had anything to do with a complaint she reportedly made to Times executives that she had not been paid the same as Bill Keller, the man she succeeded.

Disclosure: Abramson is a good friend, so I have a favorite in this dispute. But I do know a way to figure it out objectively — with some simple reporting by a competent business reporter. The result would be a story that I’m sure many people would like to see.

The New Yorker’s longtime media writer Ken Auletta reported in two web dispatches (here and here) this week that, shortly before her firing, Abramson had complained to Times executives — and even hired a lawyer to discuss the complaint for her – about her compensation. She reportedly discovered that her salary in 2013 (and through this year) was significantly less than Keller made during his last year on the job in 2010 — $503,000 for Abramson in 2013/2014 and $559,000 for Keller in 2010.

Yet Sulzberger, responded, through his spokesperson, with this statement, that Auletta duly reported:

It is simply not true that Jill’s compensation was significantly less than her predecessors. Her pay is comparable to that of earlier executive editors. In fact, in 2013, her last full year in the role, her total compensation package was more than 10 percent higher than that of her predecessor, Bill Keller, in his last full year as Executive Editor, which was 2010.

Struggling to square Abamson’s complaint with Sulzberger’s categorical statement, Auletta went on to note,

[Times spokesperson] Murphy cautioned that one shouldn’t look at salary but, rather, at total compensation, which includes, she said, any bonuses, stock grants and other long-term incentives. This distinction appears to be the basis of Sulzberger’s comment that Abramson was not earning ‘significantly less.’ But it is hard to know how to parse this without more numbers from the Times.

Auletta is right. We need more numbers from the Times — and I nominate the Times’ most savvy, take-no-prisoners financial reporter, Gretchen Morgenson, to take over the story from the Times’ media reporters and get the facts.

nyt buildingHere are some hints for where she should start.

In most public companies, an executive’s total compensation has three basic elements: salary, bonus compensation (which can be in the form of additional cash, stock or stock options), and pension contributions.

It appears clear from Auletta’s reporting, and the Times non-denial denial, that Abramson’s salary was, indeed, lower than Keller’s.

As for their pensions, in a prior statement the Times acknowledged that Keller’s was higher. But a Times spokesperson explained this credibly by noting that Keller had been employed by the company longer and had benefitted from a pension plan that had been cut back in recent years as the Times faced the financial headwinds afflicting all newspapers.

So, as Auletta speculates, that would leave the two executive editors’ annual bonuses as the element that could allow Abramson to end up with more money while getting a lower salary.

Annual bonuses are typically set at a percentage “target” of the executive’s salary, often 50 percent to 100 percent. So if the executive makes a salary of $500,000 and the target is 50 percent, then the target bonus is $250,000. Whether one hits the target depends on the criteria the board sets.

Though it is vague on specifics, the company’s 2010 and 2013 proxy statements say that bonuses for senior executives, which can be in cash or stock, are largely based on the company’s performance. Typically, in a public company that can mean that maybe 25 percent to 50 percent of an executive’s annual bonus could be based on his or her personal performance while the other 75 percent or 50 percent would be based on how the company did overall.

The Times’ board seems to believe strongly that the company’s performance is key. As the Times’ 2010 proxy statement puts it, the purpose of the Times’ Incentive Compensation Plan is to “(a) to attract, retain and reward directors, officers, other employees and persons who provide services to the Company and its Subsidiaries, (b) to link compensation to measures of the Company’s performance in order to provide additional incentives, including stock-based incentives and cash-based incentives, to such persons for the creation of stockholder value…”

So, if the executive is making $500,000 and his or her target bonus is, say, 75 percent, and 50 percent of that 75 percent is based on how the company does overall — not on the executive’s own performance — there can be large swings in compensation that have nothing to do with whether the company has determined, through its setting of the executive’s salary, the relative value of that executive compared to another.

Whether it was Keller’s fault or not, there was not a lot of stockholder value created at the Times in 2010, especially as compared to 2013.

On January 4, 2010, Times stock opened at $12.65. On December 31, 2010, the stock closed at $9.80 — a 23 percent drop.

In 2013, the year Abramson’ last bonus was determined, Times stock opened on January 2 at $8.79. It ended the year at $15.87, an 81 percent rise.

kellerSo, let’s assume — this is all speculation, I’m counting on Morgenson to get the real numbers — that Keller and Abramson both had target bonuses of 75 percent of their salaries, but 50 percent of that target depended on the company’s performance.

Obviously, Keller would have gotten little or none of that company-performance- based 50 percent, while Abramson would likely have gotten all or most of it.

Let’s further assume (more speculation) that each made 100 percent of the personal-performance-based part of the target. Abramson’s bonus would have been 75 percent of her $505,000 salary, or $378,000, bringing her total compensation to $883,000. But Keller would have gotten only 50 percent of his 75 percent target, or 37.5 percent of his $559,000 salary, for a bonus of $210,000, making is total annual compensation in 2010 $769,000.

So, Keller would have earned a lot less than Abramson — though the Times paid him more in earnings attributable to the paper’s assessment of his relative value compared to Abramson, rather than earnings attributable to how the company fared.

Indeed, if Abramson had simply earned the same salary in 2013 as Keller earned in 2010, her total annual compensation would have been $978,000, not $883,000, because her the yield from hitting her 75 percent target bonus would have been based on the higher salary. And that’s not even taking inflation – roughly 7 percent from 2010 to 2013 — into account the way we might because we’re comparing 2010 dollars to 2013 dollars.

Yes, it’s hard to feel sorry for her in either case. But those differences would be her pay equity argument.

If, as could easily be the case because lots of companies do this, their target bonuses were, say, 100 percent with 75 percent based on company performance, Abramson would have made out even better than Keller while still getting that lower salary. Again, that would not be because the company put the same or higher value on her work but because the company did better, while placing a lower value on her (as expressed in her salary).

The differences would have been still more pronounced if part of the bonus award was in a set number of Times shares — because the shares were worth twice as much for Abramson than for Keller.

So, what Morgenson, Auletta, or another business reporter needs to do is ask the Times what the target bonus percentages were for 2013 and 2010; what portion of that target was attributable, not to the executive’s personal performance, but to the company’s performance, and whether any of the awards were in pre-set numbers of shares of Times stock.

Or, Morgenson could do what she does so well: Get a leak from a board member or executive in the know.

That’s the way to resolve whether the Times did pay Abramson fairly — or whether the company shortchanged her but can now camouflage it because of factors having nothing to do with the price they put on her services.

 

PHOTO (TOP): New York Times Executive Editor Jill Abramson speaks during an interview in New York, September 21, 2011. REUTERS/Kena Betancur

PHOTO (INSERT 1): A woman exits the New York Times building in New York August 14, 2013. REUTERS/Brendan McDermid

PHOTO (INSERT 2): Bill Keller, executive editor of the New York Times, participates in the “The Future of Journalism: Who’s Going to Report the News?” panel at the 2010 Milken Institute Global Conference in Beverly Hills, California, April 28, 2010. REUTERS/Phil McCarten

13 comments

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Jill Abramson should have been paid less than her male predecessor – and her male successor should be paid less than she was being paid. The Times is struggling. It needs to invest for the future and protect the jobs of all 3500 of its workers. See attached for more. http://wp.me/p39K47-iu

Posted by LawrenceKimmel | Report as abusive

I think her beef was SALARY level not total compensation. In any event, what was the real reason that she was terminated? Her complaints about a lower salary or her overall performance, attitude and actions?

Posted by QuidProQuo | Report as abusive

Mr. Brill is on the edge of something, but he doesn’t go far enough. Between 2003 and 2011, the size of The New York Times Company – as measured by revenues – was nearly cut in half. In other words, from the time Keller took over from Raines until he handed the ball to Jill Abramson, what had been a $3.2 billion company was a $1.55 billion enterprise.
I think Brill is right when he says company performance is a prime determinant in the compensation of Times executives, both on the business and editorial side of the company. But I would also argue that looking at how the stock price did during this period – and over the course of 2013 – is not reflective of very much.
Further, Ms. Abramson was apparently whining about her compensation during a period when the reporters in her newsroom were working without a contract. It expired in 2011 and was not renewed until 2013. Isn’t it a bit tacky or her to demand even more cash when the team she supposedly led is doing without?
I sure think so.
This is an argument/discussion for the 1 percent. It does next to nothing to advance a discussion about wage discrimination. How many women in the workplace are going to complain that they are “only” making $500k a year?

Posted by deadline14 | Report as abusive

So, the take away here is that Bill Keller was a woman?

Posted by theblamee | Report as abusive

Some have said that as soon as Jill Abramson brought an attorney into her dispute with “The New York Times” that she, and her job, were toast . . . “at will employment” and all that.

I find the whole “at will employment” concept, when joined with having rights in the work place pretty naïve. And worse, even having the balls to assume you are anything but a wage slave working at the will of your employer (in this case “The New York Times”) to be even harder to hack.

Here is a media that is struggling mainly because it was not enough for “The New York Times” to control the message but those it had hired to control the message, and its “dear” readership got a little tired of being wagged.

In a very real sense “The New York Times” is getting back what it — as both the controller of the medium, the message, its readership, its employees, and a controller of women — has been putting out there.

Posted by theblamee | Report as abusive

Some have said that as soon as Jill Abramson brought an attorney into her dispute with “The New York Times” that she, and her job, were toast . . . “at will employment” and all that.

I find the whole “at will employment” concept, when joined with having rights in the work place pretty naïve. And worse, even having the balls to assume you are anything but a wage slave working at the will of your employer (in this case “The New York Times”) to be even harder to hack.

Here is a media that is struggling mainly because it was not enough for “The New York Times” to control the message but those it had hired to control the message, and its “dear” readership got a little tired of being wagged.

In a very real sense “The New York Times” is getting back what it — as both the controller of the medium, the message, its readership, its employees, and a controller of women — has been putting out there.

Posted by theblamee | Report as abusive

Money probably had nothing to do with it. People like that get fired because people don’t like working with them.

Posted by WestFlorida | Report as abusive

This is ridiculous! There is only one test when discussing fairness of pay at the executive level — was the executive paid as per the contract that he or she willingly signed?

Posted by RudyF | Report as abusive

Why the concern over rich gentry liberals like Jill Abramson? Instead, Democratic media interpreters and other pundits should be asking about why the Obama Administration doesn’t do more to stimulate private sector investment, and to promote faster economic growth. Growth will help incomes better than any government income redistribution plan. Why waste time writing about spoiled liberal elites? Abramson is not going to starve, for crying out loud.

Posted by ExDemocrat | Report as abusive

Great article. Have any enterprising journalists dug up the bonus figures and compared them?

Posted by Bolingbroke | Report as abusive

How much is her male successor being paid? Maybe the problem isn’t sexism but the deepening economic struggle newspapers are facing.

Posted by ToshiroMifune | Report as abusive

I get a lot of the analysis, and also to me the $40k disparity in base is not really enough to prve discrimination… If she thinks it is then I am guessing there are many other poor judgement calls she has made that lead to her dismissal…

People need to stop looking at people in roles in a vacuum but to look at the full picture. Example: I have more or less the same role as 2 female colleagues… I know one earns about 20%, because she is earlier in her career and has less experience, despite doing the same role. The other lady is older, has a phD and earns about 20% more than me. Is there discrimination? If you look at the roles as is, then yes, but if you look at what each person brings to the table then it’s fair.

Posted by GA_Chris | Report as abusive

All this bunk about equal pay is inaccurate and stupid. It all boils down to this. A person is worth as much as they are willing to work for.

Posted by p19 | Report as abusive