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Shareholder Lawsuit Against Madison Square Garden Says CEO Overpaid; Dolan Family Calls It 'Corporate Extortion'

Dave Royse

A shareholder lawsuit filed against The Madison Square Garden Company (NYSE: MSG) and New York Knicks CEO James Dolan alleges he’s paid far more than similar CEOs and spends too much time away from the job touring with his band. 

What Happened

The lawsuit, first reported by corporate news site The Agenda, said Dolan has been paid more than four times as much as the CEOs of MSG’s peer companies over the last three years.

Company filings show Dolan has made about $75 million in that time. The shareholder lawsuit, filed in March in Delaware, said CEOs in similar companies were paid an average of $17 million over the same period. The suit claims Dolan spends much of his time touring with the band JD & the Straight Shot.

A Madison Square Garden spokesperson told Benzinga that the litigation is a derivative lawsuit that comes as a result of a law firm, Purcell Julie & Lefkowitz LLP, sending out a press release "searching for a plaintiff." The lawsuit's plaintiff is the Norton C. Willcox Testamentary Trust.

The cash portion of Dolan's compensation package is a base salary of $1 million and a target bonus of 200 percent of the base salary, or $2 million, the spokesperson said. 

Most of the nearly $76-million package targeted in the lawsuit is a one-time award that aligns Dolan's pay with the company's performance going forward, and includes a number of options that are priced at a premium to the stock, the spokerperson said. 

Why It's Important

The suit comes amid criticism from others about high CEO pay, including recent comments by Disney family scion Abigail Disney calling Walt Disney Co (NYSE: DIS) Bob Iger's pay "insane."

In addition to the Knicks, the NBA’s most valuable franchise, MSG also owns Madison Square Garden, where the Knicks play; the NHL’s New York Rangers; Radio City Music Hall; and the WNBA’s New York Liberty, among other properties.

Dolan previously was CEO of Cablevision when it was controlled by the Dolan family. It was sold in 2016 and is now a subsidiary of Altice USA (NYSE: ATUS).

“This lawsuit amounts to nothing more than corporate harassment. The company stands by its policies and practices," the Madison Square Garden Co. said in a statement. 

Several members of the Dolan family are on the MSG board and were named in the suit. In a separate statement, family members said law firms tried a similar effort when Dolan was at Cablevision and called the suit “corporate extortion.”

Price Action

MSG stock was down 0.23 percent at $307.67 at the time of publication Thursday. 

Editor's note: this story has been updated with a statement from the Madison Square Garden Co. 

Related Links

Madison Square Garden Trading At Discount To Intrinsic Value, Imperial Capital Says In Bullish Initiation

Analyst: Why Jim Dolan Could Sell The New York Knicks

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