stickman Jon Stewart 2 centsJon Stewart, the host of the long-running Daily Show on Comedy Central, will be leaving the show later this year. When I heard this and the resulting response, three things came to mind: Executive Pay, Equity Compensation and Succession Planning. I figure I have about 600 words (about 2 minutes for you), so I should be able to cover all three without a problem.

How much can one person possibly be worth? This is apparently the mating cry of activists and non-executives. The Jon Stewart exit allows us to quantify this in a new way. When his announcement hit the market, Viacom stock dropped about 1.5%. In other words, Viacom lost $350M of its market value…in a day. While other factors may have played into this, and over time this will be absorbed into regular volatility, investors felt at least for a moment, that Jon was worth $350 MILLION DOLLARS! That is how much one person can be worth.

But, Jon isn’t even worth $0.02. For every dollar of investment, shareholders only lost one-and-half cents. Think about it this way.  If you had a pocket full of change and dropped two pennies on the sidewalk, would you panic? This leads us to equity compensation.

Equity compensation is still a mystery to many compensation professionals. People have a tough time communicating its value, understanding its cost and buying into the way it aligns employees and shareholders. I have written about the value component in the past (try this as a start). Cost is something else altogether. Many compensation professionals wonder why finance is so stingy when valuing equity. As mentioned before, a couple of pennies can quickly add up to millions of dollars. Giving each person a few extra shares can result in the same thing. If your equity plan is 10% more effective than your peers, it can mean the world in real shareholder returns.

According to a report from TV Guide , Jon is the highest paid late-night TV host, making between $25-30M annually. There is no knowing how much of this, if any, is in equity. But, we do know that he has given the network plenty of notice. We also know that there is virtually no way from a succession planning or compensation perspective that his replacement should expect to see anywhere near this amount (at least not immediately).

We hear a lot about succession planning for key positions, especially CEO.But, Jon’s exit gives us a good example of how hard this can be. There are many issues that must be addressed. How do you identify an upcoming star that can guide the show on the same success trajectory for the next 10-15 years? Some of the “best” possibilities have recently left Comedy Central to big positions, including natural successors Steven Colbert going to CBS and John Oliver to HBO. Is there anyone left to promote from within? How do you change the show to attract a new audience to “grow-up” with the new host while not alienating the old audience? And how much money will all of this take? You have to assume that every new player will expect a contract within range of the middle of the market, even though the person is unlikely to have any ability to prove their worth before the job starts.

Each of the issues are addressed by executive compensation professionals on a regular basis. Few CEOs last as long as Jon did at the Daily Show. The executives in the next layer down also change jobs frequently as they begin to bump their heads against the shoes of the person above them on the ladder.

How much is each person worth? Most can be framed within terms of market data, but a unique few can be worth more than imaginable. Why is equity compensation still so contentious? Even the smallest movements in stock price, fair value and number of shares can result in massive value shifts. How do you plan for succession when the person is “irreplaceable”? Understanding the first two items is a good start, but there is no formula that can guarantee success on this issue.

Well, that took closer to 700 words. I hope you share your perspectives on these issues. What more can we do? What else should we know?

Dan Walter is the President and CEO of Performensation a firm committed to aligning pay with company strategy and culture. Become a business leader in 8 simple steps with the book “Everything You Do in COMPENSATION IS COMMUNICATION.”  Written by Dan and fellow Comp Café writers, Ann Bares and Margaret O’Hanlon. Dan has also co-authored of several other books you may find useful including “The Decision Makers Guide to Equity Compensation”, “If I’d Only Known That”, and “Equity Alternatives.” Dan welcomes connections on LinkedIn. You can also follow him on Twitter at@Performensation and @SayOnPay.

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