Live Nation Entertainment (LYV) is one of those clubby companies that really functions more as part of a network of other more or less affiliated companies.
John Malone’s Liberty Media (LMCA) owns 20% or so of Live Nation’s stock; Cablevision (CVC) Chief Executive James L. Dolan is on Live Nation’s board and controls nearly 4 million of its shares; and together with officers and directors, a handful of big investors — including Liberty Media, Tiger Global Management, Shapiro Capital Management, Blackrock and Harris Associates — own something like 53% of Live Nation’s stock.
As a result, the annual meeting results reported by Live Nation in an 8-K filed yesterday should be particularly embarrassing to all involved.
Shareholders withheld 26% of votes cast for Dolan, for example. So assuming that the insiders and major investors all stuck together, that means most of the company’s other investors gave him the raspberry. Worse yet, the other three directors on the ballot — Ariel Emanuel, Gregory B. Maffei and Randall T. Mays — also saw sizable no votes, ranging from 14% to 25%.
Even at companies without such a clubby group of major investors, that kind of showing is pretty bad — we rarely see more than one or two directors get significant no votes. And make no mistake: In a world where most directors are swept to re-election by immense margins, even 14% of shares withheld is significant, and 25% is a wake-up call.
Shareholder dissatisfaction, though, is even more evident when you look at the company’s “say on pay” results: 64.9 million shares were voted against the company’s executive-compensation arrangements, vs. 92.6 million for it. So the pay package passed, but by a relatively narrow margin: 58.8%. In other words, once you strip away insiders and major investors like Blackrock (who presumably have direct access to management and the board), only about 10% of independent shareholders thought the pay package was appropriate. Either that, or even some of the big holders are unhappy.
And let’s face it, there’s a lot to be unhappy about at Live Nation. The company’s shares have lost nearly 22% of their value over the last 12 months, trailing the S&P 500 by more than 24 points. The company’s total return trailed the diversified media sector by nearly 33 points in 2011, and has underperformed its peers and the S&P 500 in every trailing period Morningstar tracks — 5 years, three years, one year, year-to-date, three months, one month, one week, and even one day (though only barely there).
Fundamental performance hasn’t been much better. The company has lost money three years running, some $611 million in total ($7.87 a share, excluding extraordinary items), though it did finally manage to eke out an operating gain in 2011, of 18.3 million — after recording operating losses of $465 million over the previous three years.
For this, Live Nation’s management has gotten millions of dollars — $36 million last year alone, according to the company’s April proxy filing. (That excludes another $25 million that Executive Chairman Irving Azoff got through the sale of a company he founded to Live Nation early last year). A big chunk of the total is in cash — almost $15 million, or or 41%. Granted, for most, pay went down compared to the prior year. But we can see why so many of Live Nation’s shareholders gave management and the board a big thumbs down.
Now the question is how much the club in charge really cares.
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