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Live Nation Shareholder Sues Over Executive Bonus Accounting

Live Nation Shareholder Sues Over Executive Bonus Accounting

The concert giant stands by its math that rewards CEO Michael Rapino and others with over $9 million in cash bonuses.

Live Nation shareholder Shiva Stein  filed a federal civil complaint in the Eastern District of New York on Thursday (May 24) alleging the music promoter wrongfully paid out bonuses and awards to top executives, including CEO Michael Rapino

Billboard reached out to officials with Live Nation, who provided an explanation for the bonus payouts and clarified some accounting issues, but did not comment on the lawsuit.

According to the complaint, Rapino and four other defendants were paid over $9 million in performance bonuses and more than $1 million in restricted stock awards “that they do not deserve” based on a reading of the compensation rules set by Live Nation.The two other defendants named, Independent Directors Robert Ted Enloe II and Mark S. Shapiro, are members of Live Nation’s Compensation Committee.

At issue is a disagreement over how the company’s financials are calculated and the rules governing bonuses. Stein’s lawyers claim that Rapino along with president Joe Berchtold, SVP & CAO Brian Capo, EVP of general counsel and secretary Michael Rowles and CFO Kathy Willard were wrongfully delivered bonuses and restricted stock awards based on Live Nation’s 2017 year-end adjusted operating income.

According to a 2018 proxy statement from Live Nation, executives at the company received 100 percent of the recommended bonuses and stocks because the company surpassed its goal of netting $700 million in adjusted operating income.

The suit claims that Live Nation’s Form-10 K actually shows a year-end operating income of $625 million, which is less than the minimum of 90 percent of the targeted achievement ($630 million) that the executives would need to receive to trigger the bonus payouts.

Representatives for Live Nation argue that Stein’s attorneys are omitting several factors in how AOI is calculated for bonuses and note that page 34 of the company’s proxy statement explains that calculations for “AOI for bonus is on a pro forma, constant-currency basis, adjusted for legal settlements,” meaning achievement targets are based on what the AOI the company brought in without subtracting legal payouts.

Based on that math, Live Nation’s 2017 year-end results saw an AOI of $617.2 million on a constant currency basis. When the $110 million paid for Songkick in a legal settlement is added back to the 2017 AOI, Live Nation reached a $727.2 million AOI for 2017. That number adjusted for legal settlements is 103.9 percent of the achievement target.

Stein’s lawsuit is seeking an injunction to prevent a shareholder vote on June 6, 2018, due and is calling for a revised proxy statement with what she believes would be the proper information needed for shareholders to vote at the annual meeting. The complaint also asks that those who received compensation based on the 2017 AOI return the compensation to Live Nation or forfeit it.

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