Goodell v3 06112013 final

©Gallagher Benefits Services, Inc. June 2013

The Roger Goodell Compensation Controversy: Equitable or Excessive Pay?

An Objective Peer Group Analysis

By Jack Connell and David Dreyfus

National Football League Commissioner Roger Goodell’s ubiquitous product, an integral part of the American

entertainment market, makes him one of the most well-known chief executives in the country. Recently, his

compensation made the news. As a nonprofit entity the NFL publicly discloses the compensation of its officers,

and in 2011 Mr. Goodell received a total compensation package worth $29.5M. This consisted of $3.1M in

salary, a bonus amount of $25.4M and $4.1M in other compensation and benefits.

To the casual observer, this might seem like an outsized compensation package, but that perception might be

challenged upon closer scrutiny. Outsized compared to what or whom? At Connell & Partners, a division of

Gallagher Benefit Services, Inc. (GBS), we carefully analyze executive compensation against executives’ true

market for their talent as well as shareholders’ expectations. The following article is how we would have

analyzed Mr. Goodell’s compensation had the NFL asked.

The Peer Group

The basis for much of our analysis is a peer group of companies. This is a best practice that most public

companies use to compare compensation as well as relative financial performance. GBS constructs our peer

groups based on a client’s General Industry Classification Standard codes, or GICS codes, a process that is similar

to the Institutional Shareholder Services (ISS) method. GICS codes come in 2-, 4-, 6- and 8-digit varieties,

increasing in order of granularity. The 2-digit code is the broadest definition of a company’s industry and the

8-digit is the most specific.

Once we have the initial pool of comparator firms we refine it by revenue and market capitalization, targeting

firms that have financials between 1/2–2x or 1/3–3x of our client’s (the comparator firm). In order to have a

sufficient pool of companies to choose from, we expand those financial ranges and/or move toward less

granular levels of the GICS code. Above all, we are crafting a market for executive talent with an understanding

that some flexibility exists related to industry and company size. We aim to place our client at the median for

both revenue and market capitalization, as cash compensation is largely tied to a company’s revenue and the

same can be said for equity compensation and market capitalization.

For the analysis of Mr. Goodell’s compensation, GBS was presented with the challenge of constructing a peer

group for a non-public “company” without publicly disclosed revenues. This meant that not only would we lack

a true market capitalization, but we would also have to approximate relative performance. We sourced our NFL

revenue data from Plunkett Research, Ltd., a provider of market research, industry statistics, trends and in-

depth analysis of top companies. Their estimate of total NFL revenue for the last completed fiscal year is $9.5B.

The previous year’s revenue was estimated at $9B.


Our calculation for market capitalization relied on an annual analysis of NFL franchise values. The analysis has

been done by Forbes for several years and provides the franchises’ value, debt percentage, revenue and

operating income. We used the sum of the 32 NFL franchise values net their debt, which was $28.7B according

to Forbes’ September 2012 analysis. We recognize that each of the franchises is owned independently

(or publicly by the citizens of Green Bay in the case of the Packers). However, for the purposes of this analysis,

we see each of those individual owners as akin to division managers, responsible for the financial outcome of

their own geography but inextricably linked to the fortunes of the other divisions. The owners are also the

shareholders and board of directors, responsible for hiring and compensating Mr. Goodell to manage the

organization on their behalf.

Due to the large size of the NFL, GBS was forced to examine the broadest industry scope available, the 2-digit

GICS code for Consumer Discretionary products. We chose this GICS because it includes media, entertainment

and other companies that rely heavily on management of their brands. It includes all of the NFL’s broadcast

distribution partners (ABC, CBS, NBC, Fox and DIRECTV) and one of its merchandising partners (Nike). If Mr.

Goodell ever left the NFL, or the NFL sought a new commissioner from the outside, the chief executives of these

firms would surely be on the NFL’s radar.

Using the process, GBS built the following executive compensation peer group for the NFL:

Notes: Revenue data sources: Companies – S&P Research Insight; NFL – Plunkett Research, Ltd. Market capitalizations as of 3/1/13.

No, not every peer group company is a direct product or service competitor. However, each is a large American

company with significant brand equity.

Company Ticker LocationRevenue - FY

($B)

Revenue - Last 4Q

($B)

Market Capitalization

($B)

CBS Corp. CBS New York, NY $14.1 $14.1 $27.3

DIRECTV DTV El Segundo, CA $29.7 $29.7 $27.6

Discovery Communications, Inc. DISCA Silver Spring, MD $4.5 $4.5 $17.2

Harley-Davidson, Inc. HOG Milwaukee, WI $5.6 $5.6 $11.9

Las Vegas Sands Corp. LVS Las Vegas, NV $9.4 $11.1 $42.4

Mattel, Inc. MAT El Segundo, CA $6.4 $6.4 $14.0

McDonald's Corp. MCD Oak Brook, IL $27.6 $27.6 $96.2

Netflix, Inc. NFLX Los Gatos, CA $3.6 $3.6 $10.5

Nike, Inc. NKE Beaverton, OR $24.1 $24.7 $39.0

Omnicom Group OMC New York, NY $14.2 $14.2 $15.0

Priceline.com, Inc. PCLN Norwalk, CT $5.3 $5.3 $34.4

Sirius XM Radio, Inc. SIRI New York, NY $3.4 $3.4 $20.4

Starbucks Corp. SBUX Seattle, WA $13.3 $13.7 $41.1

Time Warner Cable, Inc. TWC New York, NY $21.4 $21.4 $25.5

Viacom, Inc. VIAB New York, NY $13.9 $13.2 $29.1

Virgin Media, Inc. VMED New York, NY $6.7 $6.7 $12.5

Walt Disney Co. DIS Burbank, CA $42.3 $42.8 $98.6

Wynn Resorts Ltd. WYNN Las Vegas, NV $5.2 $5.2 $11.8

Yum! Brands, Inc. YUM Louisville, KY $13.6 $13.6 $29.5

Peer Group 25th Percentile $5.4 $5.4 $14.5



National Football League NFL New York, NY $9.5 $9.5 $28.7

Percentile Within Peer Group 45 42 59

Notes:

Source: S&P Research Insight

Market capitalizations as of 3/1/13


Benchmarking

Once the peer group has been established, GBS benchmarks against the appropriate executive matches at the

peer group companies. Compensation data for public companies is found in the DEF-14A filing, commonly

known as the proxy. We break down compensation into cash, long-term incentive (LTI) and other compensation,

and then categorize further from there. Cash compensation is composed of an executive fixed-base salary and

any short-term incentive (STI). STI can be a discretionary, non-formulaic bonus or a more quantitative non-

equity incentive program (NEIP). We gather both the target values for STI and the actual bonus distributions.

LTI compensation is broken down by grants of options, time-based restricted shares and performance-vesting

restricted shares. To value the options, GBS used the grant date fair value, usually the Black-Scholes value,

disclosed by the company. Time- and performance-vesting shares were valued at the target distribution of

shares. Many companies do not make consistent annual LTI grants, and in those cases we “annualize” the LTI

value in order to approximate the normalized value that the company intends to deliver to its executives.

Other compensation is sort of a catch-all for non-cash delivery of extraordinary benefits and perquisites to

executives. These can vary substantially by company and executive within each company. Typical perquisites

include supplementary medical exam coverage, use of company vehicles, personal and family security, financial

planning and tax preparation, and company contributions to supplemental retirement plans. The following peer

group data was gathered to make our assessment of Mr. Goodell’s compensation: 4 5 6 7 8 9 10 14

A B C = (A+B) D E = (A + D) F G H I = (F+G+H) J = (C+I) K = (E+I) L M = (K+L)

Total Cash Compensation ($K) Annual Long-Term Incentives ($K) Total Comp. ($K)

Base

Salary

Actual

Bonus /

STI

Actual

Total Cash

Target

Bonus /

STI

(% Base)

Target

Total Cash

Stock

Options

Restricted

Stock

Perf.

AwardsTotal

Other

Comp.

Total

Direct +

Indirect

CBS Corp. President and CEO $3,500 $27,500 $31,000 343% $15,500 $27,317 $4,250 $4,250 $35,817 $66,817 $51,317 $1,605 $68,422

DIRECTVChairman, President

and CEO$1,518 $3,900 $5,418 200% $4,560 $4,166 $0 $4,897 $9,063 $14,480 $13,622 $318 $14,798

Discovery Communications, Inc. President and CEO $2,962 $4,838 $7,799 169% $7,962 $23,873 $0 $20,301 $44,174 $51,974 $52,136 $430 $52,404

Harley-Davidson, Inc. President and CEO $975 $2,803 $3,778 283% $3,738 $1,735 $1,544 $0 $3,279 $7,057 $7,016 $175 $7,232

Las Vegas Sands Corp

Chairman of the

Board, CEO and

Treasurer

$1,000 $6,304 $7,304 396% $4,957 $1,825 $1,825 $0 $3,650 $10,954 $8,607 $2,891 $13,845

Mattel, Inc. CEO $1,250 $1,901 $3,151 130% $2,875 $2,297 $2,333 $922 $5,553 $8,704 $8,428 $283 $8,987

McDonald's Corp.Vice Chairman and

CEO$1,473 $3,300 $4,773 151% $3,693 $1,797 $0 $1,429 $3,226 $7,999 $6,919 $752 $8,751

Netflix, Inc.

CEO, President,

Chairman of the

Board

$500 $0 $500 N/A N/A $8,788 $0 $0 $8,788 $9,288 N/A $1 $9,289

Nike, Inc. President and CEO $1,550 $6,206 $7,756 344% $6,875 $3,648 $7,500 $0 $11,148 $18,904 $18,023 $308 $19,213

Omnicom Group President and CEO $1,000 $9,981 $10,981 840% $9,400 $0 $0 $2,139 $2,139 $13,120 $11,539 $161 $13,282

Priceline.com President and CEO $550 $4,000 $4,550 300% $2,200 $0 $0 $4,500 $4,500 $9,050 $6,700 $8 $9,058

Sirius XM Radio, Inc. CEO $1,500 $9,200 $10,700 N/A N/A $3,521 $0 $0 $3,521 $14,221 N/A $7 $14,228

Starbucks Corp.Chairman, President

and CEO$1,483 $2,309 $3,791 152% $3,733 $6,898 $0 $18,000 $24,898 $28,689 $28,631 $221 $28,910

Time Warner Cable, Inc. Chairman and CEO $1,250 $7,211 $8,461 500% $7,500 $2,829 $0 $4,592 $7,422 $15,882 $14,922 $439 $16,322

Viacom, Inc.President and CEO,

Director$3,500 $11,500 $15,000 343% $15,500 $6,000 $0 $12,127 $18,127 $33,127 $33,627 $269 $33,396

Virgin Media, Inc. CEO $1,203 $1,131 $2,334 100% $2,407 $1,166 $0 $2,538 $3,704 $6,038 $6,111 $297 $6,336

Walt Disney Co. Chairman and CEO $2,500 $16,520 $19,020 480% $14,500 $7,750 $0 $9,533 $17,283 $36,303 $31,783 $801 $37,103

Wynn Resorts Ltd Chairman and CEO $3,879 $11,063 $14,941 234% $12,941 N/A N/A N/A N/A $14,941 $12,941 $1,533 $16,475

Yum Brands, Inc.Chairman, CEO and

President$1,474 $4,541 $6,015 157% $3,794 $5,807 $0 $773 $6,580 $12,595 $10,374 $309 $12,905

Peer Group 25th Percentile $1,102 $3,052 $4,171 157% $3,733 $1,804 $0 $193 $3,663 $9,169 $8,428 $198 $9,173

Peer Group 50th Percentile $1,474 $4,838 $7,304 283% $4,957 $3,585 $0 $2,338 $7,001 $14,221 $12,941 $308 $14,228

Peer Group 75th Percentile $2,025 $9,591 $10,841 344% $9,400 $6,673 $1,158 $4,821 $15,749 $23,797 $28,631 $596 $24,061

National Football League Commissioner $3,117 $22,309 $25,426 $25,426 $4,064 $29,490

Percentile within Peer Group 85 97 97 76 100 78N/AN/A N/A

Actual

Total

Direct

($K)

Target

Total

Direct

($K)

Company Title

Notes:

DIRECTV (Chairman, President and CEO) – LTI: Represents annualized LTI. Mattel, Inc. (CEO) – TOTAL OWNERSHIP: Represents annualized LTI. Executive retired at the end of the fiscal year. Netflix, Inc. (CEO, President, Chairman of the Board) – BONUS/NON-EQUITY INCENTIVE PLAN: Company does not have a cash bonus plan. Nike, Inc. (President and CEO) – LTI: Represents annualized LTI. Executive received a $20M RSU retention grant with a 5-year vest. Sirius XM Radio, Inc. (CEO) – BONUS/NON-EQUITY INCENTIVE PLAN: Executive’s bonus is determined by the funding of an executive bonus pool, which is 2.75% of EBITDA. Starbucks Corp. (Chairman, President and CEO) – LTI: Represents annualized LTI. Executive previously received a $35M option retention grant with a 10-year vest. Wynn Resorts Ltd (Chairman and CEO) – LTI: Executive owns 10% of the company and does not participate in the LTI program.


The data shows that Mr. Goodell is above the 75th percentile for cash compensation, actual total direct

compensation and total direct and indirect compensation. Because the NFL cannot offer equity in the company,

all of Mr. Goodell’s compensation must be in cash or other benefits. Accordingly, we expect his total cash

compensation to far exceed the peer group norms, given that the majority of public company CEO

compensation is in the form of LTI. However, his total compensation package still exceeds the 75th percentile of

the peer group. In the next section, we examine whether or not this is justified.

Pay-for-Performance Assessment

Executive compensation does not occur in a vacuum. A company needs to consider not only how the dollar

value of CEO compensation compares to the peer group, but how the company performed against those peers.

This will give an indication of whether or not a company is truly paying for performance. Proxy advisory services

use relative peer group performance as a major input into their recommendations to vote for or against a

company’s proxy vote, as and on the non-binding say-on-pay votes. The most common way to measure a

company’s performance is total shareholder return (TSR). TSR is the increase in stock price plus any dividend

distributions.

Because the NFL is not a publically traded entity, GBS had to calculate the TSR for the NFL’s shareholder in a

different manner. Here we used the change in the equity value of each team assigned by Forbes, and treated the

operating income as shareholder dividends.1 Based on this method the NFL had an annual TSR of 14.0%,

approximately the peer group median. The NFL also had revenue growth of 5.6%, the peer group 25th percentile.

Note: Compensation and financial metrics are displayed in descending order. Chart is not meant to be read linearly.

1 This method of calculating the NFL’s return was validated by professors Kevin M. Murphy and Robert H. Topel of University of Chicago’s Booth School of Business in their paper The Economics of NFL Team Ownership. This report was prepared at the request of the National Football League Players’ Association.

Base Salary

($K)

Actual

Bonus/STI

($K)

Actual Total

Cash

($K)

Actual Total

Direct

Comp.

($K)

Actual Total

Direct &

Indirect

Comp.

($K)

1-Year Total

Shrhldr.

Return

Revenue

Growth

A National Football League $3,879 S $27,500 B $31,000 B $66,817 B $68,422 B 76.1% R 50.2% F

B CBS Corp. $3,500 B $22,309 A $25,426 A $51,974 D $52,404 D 44.5% B 48.2% I

C DIRECTV $3,500 P $16,520 R $19,020 R $36,303 R $37,103 R 41.4% P 41.2% L

D Discovery Communications, Inc. $3,117 A $11,500 P $15,000 P $33,127 P $33,396 P 37.9% N 25.9% S

E Harley-Davidson, Inc. $2,962 D $11,063 S $14,941 S $28,689 N $29,490 A 34.6% H 15.7% J

F Las Vegas Sands Corp $2,500 R $9,981 K $10,981 K $25,426 A $28,910 N 30.4% J 13.7% N

G Mattel, Inc. $1,550 J $9,200 M $10,700 M $18,904 J $19,213 J 22.7% T 13.0% C

H McDonald's Corp. $1,518 C $7,211 O $8,461 O $15,882 O $16,475 S 17.1% L 12.2% D

I Netflix, Inc. $1,500 M $6,304 F $7,799 D $14,941 S $16,322 O 14.0% A 12.2% H

J Nike, Inc. $1,483 N $6,206 J $7,756 J $14,480 C $14,798 C 13.5% E 11.3% T

K Omnicom Group $1,474 T $4,838 D $7,304 F $14,221 M $14,228 M 13.0% G 10.6% K

L Priceline.com $1,473 H $4,541 T $6,015 T $13,120 K $13,845 F 12.0% S 9.3% E

M Sirius XM Radio, Inc. $1,250 G $4,000 L $5,418 C $12,595 T $13,282 K 11.6% M 7.0% M

N Starbucks Corp. $1,250 O $3,900 C $4,773 H $10,954 F $12,905 T 7.1% C 7.0% G

O Time Warner Cable, Inc. $1,203 Q $3,300 H $4,550 L $9,288 I $9,289 I -0.4% K 5.6% A

P Viacom, Inc. $1,000 F $2,803 E $3,791 N $9,050 L $9,058 L -1.0% O 4.3% O

Q Virgin Media, Inc. $1,000 K $2,309 N $3,778 E $8,704 G $8,987 G -1.8% D 4.0% Q

R Walt Disney Co. $975 E $1,901 G $3,151 G $7,999 H $8,751 H -7.0% F 3.4% R

S Wynn Resorts Ltd $550 L $1,131 Q $2,334 Q $7,057 E $7,232 E -21.0% Q 1.3% B

T Yum Brands, Inc. $500 I $0 I $500 I $6,038 Q $6,336 Q -60.6% I -6.9% P

85 97 97 76 78 56 25

Notes:

Compensation and financial metrics are displayed in descending order. Chart is not meant to be read linearly.

CEO Compensation

Percentile within Peer Group

Financial Performance

Percentile within Peer Group

Peer Group Companies


Note: CBS and DISCA (Discovery Communications, Inc.) CEO pay has been displayed lower to allow for greater chart granularity.

Overall Assessment

It is the opinion of GBS that Mr. Goodell’s compensation is within market norms. We arrived at this conclusion

through both an objective and subjective assessment. Mr. Goodell has a unique compensation structure

because it is all cash, and his overall compensation package is positioned at approximately the 75th percentile of

the peer group in terms of dollar value. However, because he does not have the ability to receive equity grants,

this is the extent of value he can realize from his employer’s performance.

All the other peer group CEOs have significant equity holdings in their companies and the ability to further gain

from LTI compensation. Accordingly, the capital gains they realize from shareholder return is a significant

portion of the compensation they receive. Furthermore, cash compensation presents a less favorable tax

treatment than time- or performance-vested equity that can be eligible for capital gains treatment as opposed

to higher ordinary income rates. As long as the NFL continues its impressive growth and unprecedented

popularity, Commissioner Goodell will continue to be one of America’s most highly paid (if not admired)

executives.

This analysis is not based on an actual client situation, and is meant for informational purposes only. The analysis is in no way intended to be used as a primary basis

for benefits, fiduciary, or securities decisions. Similar results are not guaranteed and will vary based upon the individual client situations. You should

consult with financial, tax, legal, and accounting advisors before implementing any plan or course of action. Neither the information presented nor any

opinion expressed constitutes a contract or a solicitation for the purchase or sale of any product.

The charts and other data contained in this document are hypothetical and are for illustrative purposes only. The information has been made available to

you as self-help tools for your independent use and is not intended to provide investment advice. Gallagher Benefit Services, Inc., its affiliates or

representatives cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances.

CBS

DTV

DISCA

HOG

LVS

MAT

MCD

NFLX

NKE

OMC

PCLN

SIRI

SBUX

TWC

VIAB

VMED

DIS

WYNNYUM

NFL

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000

CEO Total Direct Compensation ($K) vs. Total Shareholder Return