Lots of corporate chieftains have golden parachutes, but it’s rare for them to be triggered when another executive takes the fall. That could happen at Viacom Inc.
Chief Operating Officer Tom Dooley could head for the exits and leave with about $63 million if controlling shareholder Sumner Redstone sacks his boss, Chief Executive Officer Philippe Dauman, and doesn’t offer the top job to the COO. Redstone’s lawyers said last week the nonagenarian mogul is weighing changes to Viacom’s leadership and board.
Golden parachutes put a tangible price on the tumult rocking Viacom’s executive suite as Redstone, 93 and in frail health, reasserts control over the parent company of Paramount Pictures, MTV and Nickelodeon. Dauman, who is challenging Redstone’s mental capacity in court, has an even more lucrative severance benefit of almost $83 million, according to data from the company and the Bloomberg Pay Index.
“The number at stake here is extraordinary by any estimate of severance,” said Robert J. Jackson Jr., a professor at Columbia Law School who previously practiced in the executive compensation department of Wachtell, Lipton, Rosen & Katz.
Redstone, who also controls CBS Corp. through his National Amusements Inc. theater company, is known for the rich salaries and bonuses he pays his top executives. Dauman, 62, is routinely among the highest paid media executives in the U.S. His $35.7 million in compensation last year also made him 41st overall among 200 executives tracked by Bloomberg. CBS’s CEO, Leslie Moonves, earned $46.1 million last year to place 26th.
Dooley’s contract, extended in March and outlined in an April 28 filing, includes a “good reason” clause that lets him leave with three years’ compensation if he isn’t offered the chance to succeed his boss. That would amount to $63 million, including prorated salary and bonuses, benefits and stock and options awards, according to Viacom and the Bloomberg Pay Index. The company’s No. 2 executive, Dooley could also depart if he’s removed as a director, or if Redstone makes other changes to the board.
Dauman’s “good reason” exit clause entitles him to almost $83 million, including stock considerations and benefits. He and Dooley have worked together since 1987.
While many top executives have contract terms that shield them from demotions or changes in control, it’s unusual for a senior executive like Dooley to be protected if another officer, in this case his boss, is let go. Both Dauman and CBS’s Moonves had terms in their contracts that allowed them to leave if they weren’t promoted to chairman of their respective companies when Redstone stepped down earlier this year.
CBS executives have “good reason” exit clauses that allow them to depart richly rewarded under certain circumstances. If Moonves, 66, were fired or left with good reason, he would receive about $150 million, as well as offices, a personal secretary and insurance, company filings show. Chief Operating Officer Joe Ianniello would receive about $50 million.
Dooley, 59, has been a Viacom executive for more than three decades. He joined a predecessor of the current Viacom in 1980, five years before it acquired MTV and Nickelodeon. Redstone’s National Amusements acquired Viacom two years after that.
Dooley rose through the ranks, serving on the board from 1996 to 2000 before leaving to run a private equity firm with Dauman. The two rejoined Redstone in 2006 with Dauman as CEO and Dooley as chief administrative officer. Dooley was named COO in 2010.
Over the past two years, the shares have lost half their value as Viacom’s youth-oriented TV networks lost viewers and advertisers. And Redstone is now singing a different tune, griping about the decline in shares and objecting to the proposed sale of a stake in Paramount Pictures. He hasn’t singled out Dooley for criticism and it’s possible he could choose the chief operating officer for the top job if Dauman gets pushed out.
Dauman said Thursday Viacom’s efforts to sell a stake in the Paramount studio have been slowed by the legal wrangling. In his court case, Viacom’s CEO is seeking to be reinstated to his role as a member of Redstone’s trust. He alleges the aging media billionaire is incompetent and is being manipulated by his daughter, Shari Redstone.
As members of the CBS and Viacom boards, Redstone and his daughter had a hand in approving the various executives’ contracts.
As companies have shifted to award executives more stock and less cash, the composition of most golden parachutes has skewed more heavily toward early vesting of equity awards. Yet media businesses continue to pay substantial cash bonuses to their executives, shielding them from stock declines in the event of a termination.
Almost all of the stock options held by Dauman and Dooley are under water, and most of their restricted stock awards, tied to increasing Viacom’s stock price, are worthless after the drop in the shares. If they were in another line of work, with smaller salaries and bonuses, they would walk away with much less.