Holders of shares in World Wrestling Entertainment (NYSE: WWE) have already been warned. Corporate filings with the SEC say that the interests of controlling stockholder and CEO Vince McMahon may conflict with those of other shareholders. McMahon, one would think, should have a special sense of responsibility for his nearly powerless fellow owners. The financial performance of the corporation, his obscene pay package and the price of the company’s shares say otherwise.
The WWE is well known around the world and is a particularly valuable brand, but it is a very small business by entertainment company standards. Its revenue last year was only $483 million. Profits were negligible at $25 million, with a net margin of 5%. That net income was the lowest in five years. And revenue has not grown at all over that time. Total revenue was $486 million in 2007. Net income has dropped by half over the same time five-year period through 2011.
McMahon and his senior management have done very well while the shareholders have not. WWE shares traded at $14 five years ago and rose to almost $19 in April 2010. Today, the stock sits near a five-year low at $7.90 — down 57% from the April 2010 peak.
Last year, McMahon made $1.1 million. The top five officers of the company, which include CFO George A. Barrios, EVP Kevin Dunn, EVP Paul Levesque and head of marketing Michelle D. Wilson, made an impressive $6.3 million. That was equal to roughly a quarter of the company’s net income. McMahon could have taken a smaller compensation package. He is beneficial owner of 86.6% of the WWE Class B shares, which is the source of his control over the corporation.
Governance experts would be troubled by the composition of the WWE board if they examined it. Three of the nine directors are executives.
The most serious criticism of McMahon is that he has done so little to exploit a brand with worldwide recognition. Earnings for the most recently reported quarter were mediocre again. Revenue was only $123 million. Net income was $15 million. Shares ticked up on the news but have fallen back to where they traded before the announcement.
WWE investors have every reason to complain. They have been disappointed while McMahon has done ridiculously well.
Douglas A. McIntyre