Fair Game: At PennyMac, Dueling Jobs and Big Paydays

But while shareholders have been banking these returns, Stanford L. Kurland, PennyMac’s C.E.O. and chairman, has reaped even greater riches from the REIT. He has done so through a couple of private companies: a mortgage servicing unit and an investment adviser that externally manages the REIT. These companies are units of PennyMac Financial Services, which not only earns lucrative fees from the REIT but also uses the REIT to generate business opportunities that it keeps for itself, financial statements show. Mr. Kurland owns 23 percent of the financial services company.

In other words, PennyMac Financial Services, of which Mr. Kurland is also C.E.O., is generating significant profits from a REIT on whose board he serves and to whose shareholders he owes a fiduciary duty.

“We recognize that conflict has the potential to arise in our businesses,” Mr. Kurland said in a statement. “However, each and every related-party transaction is reviewed by the related-party committee of each independent board and is subject to securities disclosure rules for related party transactions.”

First, a little history. Mr. Kurland enjoyed a long and prosperous career at Countrywide Financial, joining the company in 1979, just 10 years after Angelo R. Mozilo and David Loeb founded it. From 2004 through most of 2006, Mr. Kurland was president of Countrywide as it churned out some of the stinkiest loans ever created.

Mr. Kurland’s second act began in 2008, during the height of the financial crisis, when he founded the PennyMac REIT. He received financing from BlackRock, the money management giant, and Highbridge Capital. Since its public stock offering in 2009, PennyMac has raised $1.13 billion in equity.

While he was organizing the REIT, Mr. Kurland was also establishing a separate loan servicing company and investment adviser to provide it with management services. Rather than folding these companies into the REIT, he owned them with BlackRock and Highfields Capital, an investment firm in Boston.

Externally managed REITs, like PennyMac, are unusual today because they create the potential for conflicts if the same people run both entities. (Another such REIT, CommonWealth, was featured in this column two weeks ago.)

IT was unclear until recently how lucrative the relationship with the PennyMac REIT was for Mr. Kurland’s side companies. But an I.P.O. statement filed earlier this year by PennyMac Financial Services, the previously private company that contains the REIT’s investment adviser, lifts the curtain on the arrangement.

PennyMac REIT, the document says, paid Financial Services and its subsidiaries $96.7 million in fees last year, up from $8.5 million in 2010 and $23.4 million in 2011. That’s an 11-fold increase in just two years. In 2012 alone, the REIT accounted for more than one-third of Financial Services’ net revenue.

As for the potential conflicts, the PennyMac Financial Services offering statement notes that Mr. Kurland and others in the upper echelons of the company “may have conflicts in allocating their time and services between our operations” and those of the REIT.

In addition, the public filing states that the overlapping objectives of the REIT and the financial services company could present problems. PennyMac Financial Services might participate in some of the REIT’s investments, the document notes, without negotiating at arm’s length. This could result in potential conflicts, the filing adds, “between our interests in the investments” and those of the REIT.

An example: PennyMac Financial Services buys most of its mortgage loans from the REIT at its cost plus 0.03 percent. Then it sells them at a profit, with any luck. Last year, the financial services company generated $118 million on loans it had sold. To the degree that these gains were on loans that originated at the REIT, those were profits that the REIT could have received.

These possible conflicts were described differently for the REIT’s shareholders in a February investor presentation. There, the PennyMac REIT characterized its relationship with Financial Services as “synergistic.”

It’s hard to quantify what these potential conflicts might cost the REIT’s shareholders. But one way to look at the situation is to compare the overall returns at PennyMac Financial Services with those of the REIT.

Consider return on equity at both companies. In the first quarter of this year, that figure was roughly 78 percent at the financial services concern. At the REIT, it was 18 percent. For all of 2012, returns on equity were 67 percent at PennyMac Financial Services, versus 16 percent at the REIT.

On May 8, PennyMac Financial Services went public at $18 a share. Some 11 million shares were offered for sale, bringing the total shares outstanding to 74.2 million. After the offering, Mr. Kurland owned 23 percent, BlackRock owned 29 percent and Highfields 27 percent.

The stock closed on Friday at $20 a share, giving PennyMac Financial Services a market value of $1.48 billion. That values Mr. Kurland’s stake at $341 million.

By contrast, over at the REIT, Mr. Kurland owns approximately 335,000 shares, or about half of 1 percent of its stock outstanding.

Given this ownership imbalance, which company do you think will get more of Mr. Kurland’s attention?

His dueling jobs at the PennyMac entities also mean different paychecks for him. For his work at the REIT last year, Mr. Kurland was paid $1.87 million in stock. At PennyMac Financial Services, however, he received $2.634 million in total 2012 compensation.

So far, shareholders of the PennyMac REIT don’t seem perturbed by the potential conflicts in Mr. Kurland’s roles. And Mr. Kurland said that the companies have “disclosed potential areas of conflict to investors and put in place practices and structures that address them if they arise.” 

To eliminate any perception of conflict, Mr. Kurland could have rolled up the ancillary companies into the REIT itself. But that was not done.

As such, Mr. Kurland’s returns on his investment are far higher than those generated by the PennyMac REIT shareholders. According to financial statements, during 2009 and 2010, Mr. Kurland, BlackRock and Highfields contributed $97 million of capital into the company that became PennyMac Financial Services. Thanks to the new stock issue, that investment has grown to $1.2 billion, a more than 12-fold return.

For shareholders in the REIT, by contrast, their total return of 32 percent since the I.P.O. has been a good gain. But it’s certainly not the jackpot that Mr. Kurland has just hit.

The Media Equation: For Media Moguls, Paydays That Outstrip Other Fields

Leaders in other industries may be well paid, but as the accompanying chart shows, they earn far less than their media counterparts.

Consider: the top 20 companies in the United States ranked by market capitalization include no media companies. But according to figures assembled for The New York Times by Equilar, which compiles data on executive compensation, media companies employ seven of the top 20 highest paid chief executives.

The names are familiar and the numbers are large: Leslie Moonves of CBS ($60,253,647), David M. Zaslav of Discovery Communications ($49,932,867), Robert A. Iger of Walt Disney ($37,103,208), Philippe P. Dauman of Viacom ($33,396,104), Jeffrey L. Bewkes of Time Warner ($25,670,263), Brian L. Roberts of Comcast ($25,087,379), and Rupert Murdoch of News Corporation ($22,418,292).

Mr. Moonves was the third highest paid executive in 2012, bested by Larry Ellison, who made $96.2 million as head of Oracle, and Robert Kotick, chief executive of Activision Blizzard, whose recently announced compensation came to $64.9 million, although much of it is in the form of stock options that vest over five years.

(Activision produces video games like Call of Duty, so depending on how you define media, he might be the highest paid in the industry.)

Mr. Moonves may be in a league of his own, but he is hardly the only chief executive banking hefty compensation. The data indicates that average pay of the 10 highest paid chief executives for media companies was about $30 million, more than the captains of technology or finance and other industries, who average $6 million to $14 million less.

Median pay for the top 20 media executives rose 10 percent in 2012, adding to a very tall stack. Not bad for a legacy industry that is supposedly under sustained attack from insurgents and secular challenges.

Many media companies file their proxy statements at the last possible minute, perhaps part of an effort to avoid ending up on annual surveys of executive compensation, like the one The Times did at the beginning of April. But now that everyone is accounted for, it’s clear that being a king in the media realm comes with a very lucrative crown.

A few important caveats. The margins in the media business can be spectacular when things are going well — operating income at CBS for 2012 was $2.98 billion — which explains in part why the chief executive at Kraft, which is about the same size as CBS and had net earnings of $1.64 billion, makes $6.8 million, not $60 million like Mr. Moonves. Making cheese is fine, but running a media outfit that sells cheese through commercials is where the money is.

Clearly, the market had a crush on media stocks last year. The stock price of CBS rose 42 percent in 2012 while Mr. Zaslav oversaw a 55 percent rise at Discovery. Corporate boards have employment agreements that are usually generous when the arrows on the charts are pointing sharply upward.

“David’s compensation is almost entirely tied to stock appreciation,” said David C. Leavy, a spokesman at Discovery. “With the market continuing to value Discovery’s global growth prospectives, there has been tremendous value creation for shareholders.”

Media companies are prospering by selling their content through all kinds of windows with some raking in cable and retransmission fees that just keep growing. Most major players drove their stock price up 30 percent or more, partly because of excellent results and generous stock buybacks. As might be expected, the vast majority of the compensation comes in the form of performance incentives, as opposed to salary. (Although some of those incentives are very generously structured.)

And it would be churlish to suggest that running a huge company in an industry full of big bets, big egos and big challenges is simple. The media business requires mastering various platforms, multiple divas and, increasingly, myriad foreign markets.

But approving the right projects while monetizing those assets through various channels of distribution is not akin to creating a hardware market, as Apple did, or reinventing the advertising model, as Google has. An average annual compensation of $30 million seems like an entrepreneurial reward being paid out for management execution.

The compensation numbers can add up quickly, especially in an industry that is madly spinning off divisions. Companies may get smaller as they are split into discrete units — Viacom and CBS are two halves of what used to be one orange, as are Time Warner and Time Warner Cable — but the payouts continue to storm along.

E-mail: carr@nytimes.com;

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At Hedge Funds and Private Equity, Lucrative Paydays

We rely on filings required by the Securities and Exchange Commission for public companies. That means we are missing entire categories of businesses: privately held corporations, most hedge funds and many private equity firms. Some sleuthing shows that payouts given to private equity titans and hedge fund managers were often significantly higher than that of the mere mortals on our list.

Four of the largest private equity firms — the Carlyle Group, Apollo Global Management, the Blackstone Group and Kohlberg Kravis Roberts & Company — went public in recent years, a move that required them to begin disclosing executive pay. Their executives don’t show up on our main list because we look only at companies with total revenue of more than $5 billion. Unlike executive pay at most corporations, much wealth here is derived from their ownership stakes in these firms, and, each year, they get payouts based on their stakes.

Distributions at private equity firms are analogous to dividends corporations pay shareholders, said Victor Fleischer, a professor at the University of Colorado Law School and a columnist for DealBook. Private equity executives may also hold direct ownership stakes in the funds managed by the firm, so distributions from those funds wouldn’t necessarily show up in the public data, he noted.

If all of the distribution payouts were factored in, some of these executives’ pay packages would dwarf those on our list.

Consider Leon Black, C.E.O. of Apollo Global Management, among the largest private equity firms with $2.86 billion in 2012 revenue. He took in more than $125 million last year. A tiny piece — $287,000 — was from salary and other base compensation. The bulk was from distributions based on the 92.7 million shares he owns in the firm, according to Equilar calculations.

Steve Schwarzman, founder and chief executive of the Blackstone Group, took in $8.4 million in compensation last year, and his distributions earned him an additional $204 million. “Mr. Schwarzman has a salary and does not take a bonus,” said Peter Rose, a Blackstone spokesman, in response to Equilar’s research. “He gets dividends on his Blackstone stock, just like the public, and he gets his share of the gains in the funds he invests in. His interests perfectly match up with our fund investors and our public shareholders.”

The wealth of executives at Kohlberg Kravis Roberts was harder to determine, because it disclosed only distribution payouts on common units and not on the convertible ownership units held by top executives. But even excluding those payouts, the two co-chiefs at K.K.R., Henry R. Kravis and George R. Roberts, made more than $35 million each in compensation.

These large payments would not be obvious to the casual reader of proxy statements. Only the salary, bonuses and certain other pay like stock grants are listed plainly on the annual compensation tables in S.E.C. filings. To determine the big dividend payouts, Equilar pieced together information in other parts of the company’s annual report.

A spokesman at Apollo Global declined to comment on its compensation, and representatives for Carlyle and K.K.R. did not reply to requests for comment.

HEDGE fund managers typically prize secrecy. Only a handful of hedge funds — including Och-Ziff, Fortress Investment and Oaktree Capital Management — are publicly traded and thus required to disclose their executive pay packages.

Each year, AR magazine estimates hedge fund managers’ pay based on the fees they charge clients as well as the change in value of their personal stakes. In 2011, Ray Dalio, the founder of Bridgewater Associates, had an estimated payday of $3.9 billion (yes, billion with a “b”), according to AR magazine. The activist investor Carl C. Icahn was estimated to have earned $2.5 billion in 2011. The 2012 list will be published in the coming weeks.

By comparison, the publicly traded hedge funds paid their C.E.O.’s relatively meager amounts. Oaktree Capital’s president, Bruce Karsh, made about $12.2 million in base compensation and about $64 million in distributions in 2012. (Forbes estimated his net worth at $1.65 billion.)

To be fair, many hedge fund managers have most of their wealth tied up in the funds themselves. For instance, Steven A. Cohen, one of the consistently top-paid hedge fund managers, owns more than half of the estimated $15 billion in assets managed by his firm, SAC Capital.