For a company with a market cap of around $182 million, one might argue that Martha Stewart is overpaid. Ralph Lauren Corp. (NYSE: RL) has a market cap of more than $15 billion and Mr. Lauren was paid a base salary of $1.25 million in fiscal year 2012, and he was eligible for bonus payments up to an additional $19.5 million. Lauren also serves as his company’s CEO and chairman, while Stewart is the nonexecutive chairman and chief editorial media and content officer at MSO.
Stewart’s compensation is virtually all guaranteed by an “Intangible Asset License Agreement” that treats Stewart as “talent,” in much the same way that a movie or TV actor is treated. Last year, MSO extended Stewart’s contract, which was set to expire last March, through June of 2017, although terms have not yet been finalized. According to an amended Form 10-K filing made last week, “Ms. Stewart’s base salary recognizes her incredible value to the company in providing her creativity and talent to the company’s businesses.”
In other words, without Martha Stewart there is no MSO. She is in the driver’s seat at contract time. And how does it pay off? Well, when MSO announced its controversial agreement with J.C. Penney Co. Inc. (NYSE: JCP), J.C. Penney was required to purchase 11 million shares at a cost of $38.5 million.
The current court fight between J.C. Penney and Macy’s Inc. (NYSE: M) turns on the value of Stewart’s name. Stewart’s value may not be “incredible” to either J.C. Penney or Macy’s, but it is definitely large enough to wage an expensive courtroom battle over.
While Stewart’s total compensation package appears to be out of line with the company’s market cap and sales, without her name MSO likely would be out of business.
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