A fuzzy picture at DirecTV…

February 16, 2012

DirecTV (DTV) recently came out with a line of moderately edgy ads that drew a definitive connection between wearing an eyepatch on a city bus and getting beaten up (or something — we’re not quite sure). We’d love to see what the company’s marketing team would do with the 8-K DirecTV filed yesterday.

In that document, the company laid out a slew of equity awards for top executives, dwarfing what the executives got a year ago. Unfortunately, shareholders don’t seem to have enjoyed the same gains: While the company’s performance last year was better than it was in 2010, the improvement doesn’t quite reflect the executives’ rewards.

According to the 8-K, most of the company’s top executives got two tranches of restricted stock units and a big dollop of stock options. So just by way of example, Chief Financial Officer Patrick T. Doyle got 75,474 RSUs and 391,878 options; Bruce Churchill, whose title is the clunky “President – New Enterprises and DirecTV Latin America,” got 188,189 RSUs and 612,510 options. To put Churchill’s awards in perspective, at recent prices, his RSUs alone would be worth $8.7 million, though in fact many of them vest over the next several years. You get the idea. (Chairman and Chief Executive Michael D. White wasn’t included in this round, under a provision of his employment agreement that provides for separate awards.)

The filing makes clear that a bunch of the RSUs were granted pursuant to a 2009 grant that functions as a kind of long-term incentive program. But last year, the company also disclosed twin-barreled awards in a Valentine’s Day 8-K — long-term plus one-year awards — and they weren’t nearly as big: Doyle got 67,502 RSUs, and Churchill got 107,809. Plus, there weren’t any stock-option awards involved.

We’re told in the most recent 8-K that for the longer-term awards, the board determined that various performance goals had been met. That leaves us questioning the thresholds the board has set, because we’re not convinced that shareholders are getting the same reward. While the executives’ option grants are valuable only to the degree the stock rises, their RSUs will be worth something pretty much whatever happens (unless the execs leave the company, and so on).

And, let’s face it, DirecTV shareholders have been left somewhat wanting of late. Over the last 12 months, its share price has lagged both DISH Network (DISH) and Comcast (CMCSA). On a total-return basis, DirecTV didn’t quite keep up with the pay-TV industry as a whole in 2011, according to Morningstar data, and continues to lag so far this year (and in fact, has for the last three years — the period covered by DirecTV’s longer-term equity awards). Stock performance doesn’t always directly reflect a company’s financial performance, of course, and here DirecTV seems to be doing somewhat better.

In the end, there’s at least one shareholder who may not care much: Warren Buffett’s Berkshire Hathaway. As has been reported elsewhere, it raised its stake in DirecTV dramatically to roughly 20 million shares valued at $870 million, from about 4.25 million shares.

We’d say maybe Warren Buffett knows something we don’t, but that’s surely a given. We just hope that what he knows about DirecTV warrants the optimism.

Image source: Old television image via Shutterstock.com

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