Mel signs for three more years at Viacom
The soap opera is over in the executive suite at Viacom (N:VIA & VIAb). The company announced Thursday morning (3/20) that Mel Karmazin has signed a contract to remain as President and COO for three more years. Both he and Chairman and CEO Sumner Redstone have signed new contracts which will become effective 5/5/03 and run through 5/5/06.
As we speculated (3/20 RBR Daily Epaper #56), Karmazin gave up much, but not all, of the autonomy which had been guaranteed him for three years following the merger of CBS into Viacom.
Under the terms of the new contracts, Karmazin will have authority over day-to-day operations, with all senior executives reporting to him, but Karmazin will report to Redstone. If there's a disagreement over operations or whether to fire a senior executive, the dispute would be settled by the Viacom Board of Directors. Redstone would also have to seek board approval to fire Karmazin.
Redstone and Karmazin have identical pay packages, which should pay them each (including bonuses) $7,655,000 this year, plus $2,993,000 in deferred compensation.
"I am very pleased that Viacom will continue to benefit from Mel's leadership and talent," Redstone said in a statement. "The CBS merger brought many great assets together under the Viacom name, and Mel has done a masterful job of integrating those businesses and operating them at peak performance. I look forward to continuing our successful partnership and taking Viacom to new heights in the years to come."
Karmazin, who had remained mostly silent about the tense contract negotiations over the past several months, also issued an upbeat statement: "Viacom is a great company and is performing at the highest levels in its history. Not only have I had the privilege of working with Sumner, one of the great visionaries and executives in the entertainment industry, but also the privilege of being associated with the most talented and disciplined management team in the media business. I am very excited about the future and working with Sumner to keep Viacom at the forefront of the media industry while building value for our shareholders."
RBR Observation:
Signing Mel for another stint was what Wall Street had wanted all along, so traders bid Viacom's stock up 5% yesterday on the good news.
Just a few months ago, Karmazin told investors on a Wall Street conference call that he was wearing a T-shirt which said "we won't do anything stupid" (7/26/02 RBR Daily Epaper #15).
Click here to listen to Mel Karmazin's comment about the Viacom T-Shirt
At that time he was referring to the company's financial performance, but it looks like he carried that philosophy to negotiating his own contract. He would have liked to have maintained the degree of authority he had under the three-year merger deal, but that was a deal breaker. But was it worth walking away from running Viacom just because Redstone was taking back most of the powers that normally come with being CEO? In the end, the two came to terms and no one did anything stupid.
So, what's changing? Probably not much that anyone would notice on a day-to-day basis. After all, this was a clash of egos, not any disagreement over how to run the company. Mel is still running operations. Only if there's a disagreement with Sumner over how he's running the company will the board of directors step in. In that case, Sumner will win the argument. Come May, none of the former CBS designees will have guaranteed seats on the board - - except for Mel himself (that's in his new contract). With his majority voting power restored, Sumner will be able to replace any of the directors at will, so he holds the ultimate power.
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