Sony Hack Shows Film Studio Head Paid Double CEO Hirai

By Pavel Alpeyev and Grace Huang  

Dec. 10 (Bloomberg) -- NYU Undergraduate Film Chair Joe Pichirallo and Entertainment Consultant Kathryn Arnold discuss the fallout from Sony Pictures’ documents that were leaked by hackers. They speak on “Bloomberg West.” (Source: Bloomberg)

Sony Corp. (6758)’s movie-studio head Michael Lynton is paid about twice the salary of his boss, Chief Executive Officer Kazuo Hirai, according to documents leaked by hackers who broke into the company’s computers.
A spreadsheet posted on file-sharing site Pirate Bay shows that Lynton, the chairman of Sony Pictures, earned $3 million. Hirai was paid 184 million yen, or $1.5 million by the current exchange rate, in the last fiscal year, company filings show.
Hirai’s compensation would put him on par with a programming president at the entertainment subsidiary. In addition to that salary, Hirai receives stock options. Eight other executives named in the documents earned the same or more than the parent company’s CEO.
The necessity to keep high-quality talent in the U.S. -- at an
investment bank or a movie studio -- means some stars make more than their bosses. That nine executives made at least as much as Hirai stands out, however.
The leaked documents also highlight a gap in top-tier incomes between Japan and the U.S. Hirai’s predecessor, Howard Stringer, a longtime American media executive, earned about $9.1 million in 2010, making him Japan’s second-highest paid executive at the time.

Photographer: Kiyoshi Ota/Bloomberg

Kazuo Hirai, president and chief executive officer of Sony Corp., left, and Michael... Read More

The compensation spreadsheet was part of the latest batch of documents that the hackers have released every few days since the breach garnered global headlines Nov. 25. Guardians of Peace, as the hackers call themselves, have released at least four batches of data and they show no signs of stopping, complicating the Japanese company’s response to the intrusion.

Shares Drop

Shares of Sony dropped 1.6 percent to 2,464 yen at the close of trade in Tokyo today. The stock is down 8 percent this week, headed for its first weekly decline in almost two months.
The information made public so far includes thousands of employee salaries showing disparities between Japanese and U.S. staff.
The leaked material lists 19 Sony Pictures employees with base pay of $1 million or more. The data details pay of more than 6,700 workers at the unit, from managers to interns.
A Tokyo-based spokeswoman at Sony Pictures declined to comment on executive salaries because they aren’t disclosed. She asked not to be named, citing company policy.
Leaked messages from Hirai to Sony Pictures Entertainment Co-Chairman Amy Pascal also show that the CEO ultimately gave the go-ahead to an edited scene in “The Interview” depicting the death of North Korean leader Kim Jong Un. The movie had already drawn scorn from North Korean officials, who called it an “act of war” and promised in June to “mercilessly destroy” anyone who had a hand in making it.

Photographer: Kiyoshi Ota/Bloomberg

Kazuo Hirai, chief executive officer of Sony Corp.

“The Interview,” which stars Seth Rogen, is scheduled to open Dec. 25. North Korea, which has denied any involvement in the Sony episode, said in a statement this month that the hack “might be a righteous deed” of its supporters or sympathizers.
More to Come?
The e-mails also show a spat between Pascal and Hollywood producer Scott Rudin after Sony’s decision to back out of a Steve Jobs film.
The first 100-gigabyte dump on Dec. 3 contained more than 84,000 documents, including personal pictures, home addresses, workplace-harassment reports and credit-card numbers. Hackers are now releasing executive e-mails on file-sharing websites.
“It wouldn’t be so bad if this was the extent of the leak, but there is a good chance that more will be uncovered,” said Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo. “There is still a possibility of sensitive customer data coming to light.”

North Korea

Sony’s internal probe, which is being conducted by consultants including Milpitas, California-based FireEye Inc. (FEYE), has linked the attack to hackers known as DarkSeoul, according to two people familiar with the company’s investigation. The group is widely believed to work for North Korea. Sony hasn’t made that association publicly.

Photographer: Kiyoshi Ota/Bloomberg

Michael Lynton, Chief Executive Officer of Sony Pictures Entertainment Inc., gestures... Read More

“That much data being accessed and Sony doesn’t notice suggests there is a structural problem at the company,” said Hideki Yasuda, a Tokyo-based analyst at Ace Research Institute. “Who knows what all has been leaked out and the impact that will have.”
Sony Pictures is following through with plans to reduce expenses by $695 million in the three years to March 2017, Lynton said last month. Hirai at the time made a case to investors for growth in the entertainment business, more than a year after rejecting billionaire Daniel Loeb’s push to spin off part of the unit.
When Loeb announced in October he’d sold his stake in the company, Sony Pictures executives expressed relief, according to e-mail exchanges leaked by the hackers. “Champagne for all,” wrote the Culver City, California, studio’s Chief Financial Officer David Hendler.